Scots growth lags UK
Private sector shows marginal expansion but manufacturing output shrinks
SCOTLAND’S private sector economy returned to growth in December but employment declined for the first time since last July and manufacturing output contracted for a second straight month, a survey has shown.
Bank of Scotland’s latest PMI (purchasing managers’ index) report also shows that the economy north of the Border, while it returned to marginal expansion last month, was way adrift of the growth rate for the UK as a whole.
The output index for Scotland’s private sector economy edged up from 49.8 in November to 50.3 in December on a seasonally-adjusted basis, taking it back above the level of 50 deemed to separate expansion from contraction. This index measures the combined output of the manufacturing and services sectors.
For the UK as a whole, the output index was at 55.3 in December. Although this reading was down from 55.7 in November, it signalled expansion in the private sector economy was significantly stronger in the UK as a whole than in Scotland.
The business activity index for the Scottish services sector was unchanged between November and December, at 50.6.
Although the Scottish manufacturing output index rose from 46.9 in November to 49.4 last month, it continued to signal contraction.
Surveys have indicated that the oil and gas sector downturn is weighing on Scotland’s overall economic performance.
Official third-quarter gross domestic product (GDP) figures for Scotland are due to be published on Wednesday. Scottish Government figures last October showed growth was significantly weaker north of the Border than in the UK as a whole in the second quarter of last year.
Garry Clark, at Scottish Chambers of Commerce, said last week that all eyes would be on the third-quarter data to see whether the disparity in GDP growth in the three months to June was a “statistical blip” or a “real divergence”.
The PMI report’s employment index for the Scottish private sector economy fell from 50.6 in November to 49.7 in December, way adrift of a corresponding UK-wide reading of 53.5.
Employment in the Scottish manufacturing sector fell for a third consecutive month in December. The employment index for the manufacturing sector north of the Border fell from 48.4 in November to 48 last month, signalling a slight acceleration in the pace of decline.
Scotland’s services sector recorded only marginal growth in employment last month. The services employment index fell from 51.2 in November to 50.2 in December.
The Scottish manufacturing sector suffered continuing significant falls in total new orders and incoming export business in December, according to the PMI survey.
The rate of decline of total new orders eased slightly for Scottish manufacturers between November and December, However, the pace of decline of new export orders accelerated.
Alasdair Gardner, Bank of Scotland’s managing director for commercial banking north of the Border, noted the return to growth in the Scottish private sector economy.
However, he added: “Despite returning to expansion territory, Scottish manufacturers struggled to cope with a lack of new orders from both domestic and foreign markets. This acted as a brake on overall output growth.”
The survey showed an acceleration in growth of new business in the Scottish services sector between November and December, although the rate of increase was still modest.
Mr Gardner said: “Service providers showed signs of economic optimism, with headcounts and new business levels expanding. However, these improvements were marginal, and insufficient to propel the economy in a higher gear at the end of 2015.”
The survey signals an overall return to growth of new business in Scotland’s private sector economy in December, albeit this increase was marginal.
It shows output prices fell again in both the Scottish manufacturing and services sectors.