By Ian McConnell
GROWTH of Scotland’s private-sector economy accelerated in March to its fastest pace in nine months even though manufacturing went back into reverse and inflationary pressures intensified further, a survey shows.
The Royal Bank of Scotland PMI (purchasing managers’ index) report shows Scottish manufacturing output fell for the third time in four months in March, albeit only marginally, with overall growth driven by strong expansion of the dominant services sector.
Scottish companies’ input costs and prices charged both rose overall at their fastest rates on record. The survey began in 1997.
Royal Bank said: “Cost pressures faced by Scottish private-sector companies remained steep in March, with the overall rate of input price inflation reaching a fresh record high. By sector, manufacturers reported a quicker increase than services firms. Respondents highlighted a variety of contributing factors such as increased material and energy prices, ongoing shortages, Brexit and the invasion of Ukraine.”
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The seasonally adjusted business activity index for Scotland rose to 58.4 last month, from 55.5 in February, moving further above the 50 mark deemed to separate expansion from contraction to signal the fastest growth in nine months.
Scotland’s private sector recorded a 12th consecutive monthly rise in employment in March, with firms flagging growing workload pressures and preparation for a rise in business requirements in the months ahead. However, employment growth slowed from a three-month high in February and was weaker than that recorded for the UK as a whole.
Malcolm Buchanan, who chairs Royal Bank’s Scotland board, said: “Despite strong growth overall, supply-side issues and substantial inflationary pressures persisted...Given the current state of play with regards to inflation, the downside risks to the demand-side of the economy have intensified.”
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He added: "March data revealed a continued improvement across the Scottish private sector. The ongoing pandemic recovery and the resulting boost to client confidence supported activity and demand conditions. Crucially, however, trends diverged by sector as sharp growth in output at services firms managed to offset a slight contraction in manufacturing production."
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