A STRONG manufacturing performance enabled Scotland’s private sector economy to achieve slight growth in April, as output of the key services sector fell again, a survey shows.
Bank of Scotland’s latest Purchasing Managers’ Index report signals private sector growth in Scotland remained well adrift of that in the UK as a whole last month.
It also shows continuing inflationary pressures, driven by sterling’s weakness in the wake of the Brexit vote, and flags the impact of continuing political and economic uncertainty.
News of further political upheaval came last month when Prime Minister Theresa May called a snap General Election for June 8.
The Bank of Scotland survey, compiled by financial information company Markit, shows a decline in the business confidence reading to the lowest in six months.
The bank’s purchasing managers’ index (PMI) for the Scottish private sector economy, which measures month-on-month changes in combined manufacturing and services sector output, rose from 50.1 in March to 50.6 in April on a seasonally adjusted basis.
This signals slight growth in April, after near-stagnation in March. A reading of more than 50 indicates expansion.
The corresponding index measuring output of the UK private sector economy rose from 54.8 in March to 56.2 in April on a seasonally adjusted basis.
In Scotland, the manufacturing output index rose from 55 in March to 56.1 in April, with companies citing increased demand from customers. And manufacturers saw a sharp acceleration in growth of new orders to the fastest pace in three months.
The business activity index for the services sector in Scotland edged up from 48.9 in March to 49.2 in April, remaining below the 50 mark to signal a second consecutive month of decline.
Employment growth in the Scottish private sector economy accelerated in April to the fastest pace in eight months.
Both the manufacturing and services sectors saw faster rates of growth in employment.
The manufacturing employment index for Scotland climbed from 50.8 in March to 53.1 last month.
In spite of the fall in services output in April, the employment index for this sector north of the Border rose from 50.1 in March to 51.6 in April. The survey shows a slight acceleration of growth in new business in the Scottish services sector in April, although the pace of increase remained modest.
Services companies had to endure a sharp acceleration in the pace of increase of their overall costs in April, to the fastest rate for nearly six years.
About 14 per cent of Scottish services companies reported they had increased their prices. Only three per cent said they had lowered their charges.
Fraser Sime, a director in Bank of Scotland’s commercial banking business, said:
“April’s PMI signalled a tentative upturn in Scottish private sector growth, with both output and employment increasing at faster rates. The latest survey’s results were driven by a strong manufacturing sector, which moved up a gear in April.”
He noted “steep production growth” and “solid job creation” in the manufacturing sector.
Mr Sime added: “The service sector marred April’s PMI score as business activity in the sector shrunk for the second month running. A faster rise in new orders bodes well, though continued growth in the second quarter remains heavily dependent on the relatively stronger manufacturing sector.”
Commenting on inflationary pressures in the private sector economy north of the Border, Bank of Scotland said: “Price pressures remained sharp in April. Furthermore, input price inflation was higher than the UK average for the first time in four months. Panellists noted rising raw material costs and wage pressures as key factors.
“According to anecdotal evidence, companies then passed on part of the burden of increased costs to customers, as corroborated by a marked rise in output charges in April.”
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