By Russell Bruce
The latest Bank of Scotland Purchasing Manager’s Report (PMI) for December confirms that businesses in Scotland succeeded in delivering month on month growth throughout 2011.
Companies in November reported an increase in employment compared to the previous month and did so again in December. In comparison the UK report showed employment flatlining for the sixth successive month.
Strongest economic growth came from the services sector recording 52.2 which is the highest figure of monthly growth since August. A figure above 50 represents growth while a figure below 50 represents contraction since the previous month.
Within the service sector, Business Services continued a strong growth run at 52.6, Financial Services came in at 52.4 and Travel, Tourism and Leisure ended the year at an encouraging 51.3 following weakness in the previous 3 months.
After sustained growth for most of 2011 manufacturing saw a dip to 48.4 with both new orders and export orders in negative territory, albeit slightly better than in November. Respondents who reported fewer international business wins linked this to the general global slowdown.
Despite output levels and incoming new business both falling on the month, Scottish manufacturers continued to recruit additional staff during December.
Employment within the sector has now increased throughout the past 23 months. The rate of job creation was, however, the weakest for 6 months, and only modest overall.
Manufacturers have been reporting significant purchase cost inflation throughout 2011 although this eased in December to 58.9 from 66.7 in July.
The rate of growth of input prices nevertheless remained faster than the historical series average, with energy, food, fuel and metals all reported as up in price. A number of respondents also highlighted paying more for imported goods in December.
Speaking about the latest PMI Scottish report Donald MacRae, Chief Economist at Bank of Scotland, said:
“The PMI has been positive (above 50) for all 12 months of 2011 indicating growth in the private sector of the Scottish economy. However, the last four months have seen a slowdown with December’s result just positive at 51.2.
“A pickup in the services sector at the end of last year has compensated for falling output and export orders from a manufacturing sector suffering from the slowing of the Eurozone economies.
“The increase in new business for the first time in four months is very welcome and suggests the Scottish economy, while struggling to grow, is avoiding a fall in output.”