Russell Bruce: Scottish firms report fastest growth in 15 years

Russell Bruce

Scottish output continues to grow month on month, indicating that the economy is slowly beginning to pick up.  Firms are continuing to recruit, increasing employment to meet demand and rising backlogs according to the latest Purchasing Managers’ Index from Bank of Scotland.

Manufacturing has again shown more growth this month at 58 against 56 for the services sector. Scottish manufacturers are showing the second highest growth acceleration since the beginning of 1998 when data collection began. In over 15 years, only February 2011 recorded a higher monthly figure for manufacturing growth output.

The ratings are based on a mark above or below 50. A rating below 50 indicates contraction from the previous month and a rating above 50 measures the growth over the previous month’s report.

Purchasing Managers’ Indexes are produced for all major economies and are highly regarded as a measure of the direction of economic performance.

Markit Economics who carry out the research for Bank of Scotland report that a key driver of the expansion in Scottish manufacturing production was a marked increase in the level of new orders since June. July’s increase in output was the fourth in as many months, and with rising levels of new orders the manufacturing sector is continuing to recruit.

Improved marketing, increased market confidence and a stronger performance in the construction sector were all factors reportedly helping boost manufacturing demand.

An improvement in export demand for the first time in five months is encouraging with firms reporting increased sales to clients in Ireland, the Middle East and northern Europe.

The services sector also showed strong growth adding to a sequence of 30 months previous growth with broad based expansion across all service sectors with new business gains reported.

July saw the seasonally adjusted New Business Index for the services sector climb to its highest level since March 1998.

Overall the rate of job creation quickened for the fourth month in a row, to a robust pace that was the fastest in the series history. Employment in the goods-producing sector has risen in each month since February.

This month’s data suggests that additional jobs are likely to be created in coming months to counter accumulating backlogs of work. July saw the most marked rise in outstanding business in more than six years.

Donald MacRae, Chief Economist at Bank of Scotland, said: ‘July’s strong PMI reading signalled the Scottish economic recovery continues.  Both manufacturing output and services activity increased in the month, with services firms experiencing the fastest rise in new work in over 15 years.

‘July saw a return to growth in new export orders for the first time in five months. Business confidence is clearly on the increase with employment rising for the eighth month in a row. The recovery will become even more embedded if firms build on this ten-month run of positive PMIs by increasing investment.’

Russell Bruce

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