Economy: Strong start to 2014

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  By Russell Bruce
 
The Scottish Purchasing Mangers’ Index (PMI) produced by Markit Economics for the Bank of Scotland shows sustained and strong growth in the private sector for March.  Building on solid figures in the January and February reports, the March results end the first quarter of 2014 on a very positive note.
 
The service sector inflow of new business is now running at 19 months of continuous growth. New business levels are clearly adding to growth in overall business activity in the service sector running at 39 months of continuous growth. The number of service businesses reporting higher business activity throughout the first quarter of 2104 ends with March on a high of +22.5% (January +5.2%, February +20.1%).

The upturn in business activity had a positive impact on the labour market, with service providers adding to their payrolls for the twenty-second straight month amid attempts to keep atop of increased workloads. Although less marked than February’s survey record, the overall rate of job creation was still solid in the context of historical survey data.

Manufacturing output growth rebounded from the modest rate seen in February, although slightly slower than January’s high. Factory production has now increased in 11 of the past 12 months. Increased demand leading to higher new orders remained the driver of the upturn in output, according to panel member reports.

Employment at manufacturers increased at a faster rate in March. Markit Economics reports that job creation was the strongest in the history of the series dating back to 1998. Among those manufacturing firms reporting a higher level of employment than one month earlier, there was frequent mention of temporary and part-time staff being recruited.

The seasonally adjusted index in manufacturing employment for the first quarter of 2014 was 53.7 in January, 52.9 in February and 54.9 in March. A figure above 50 represents growth from the previous month compared to a figure below 50, which would indicate contraction.

Donald MacRae, Chief Economist at Bank of Scotland, said: “The March PMI signalled further strong growth of business activity across both manufacturing and service sectors. Not only did the level of new orders increase, but employment rose for the sixteenth month in a row, while cost pressures eased. New export orders fell for the second consecutive month illustrating the challenge of improving our trade performance. The Scottish economy has added another month of expansion further embedding the growing recovery.”

Cabinet Secretary for Finance John Swinney said:

“We warmly welcome these figures which indicate Scottish private sector activity expanded for the 18th consecutive month. Following the January and February PMI, which both reported growth in output, the March reading suggests that the first quarter of 2014 ended on a positive note.

“Scotland’s economy is continuing to make headway, but there is no room for complacency.

“As Scotland’s Future outlines, with the full fiscal and economic powers of independence, the Scottish Government could do so much more to strengthen our economy and create more jobs.”