Private sector output expanded last month at its fastest pace since June 2007, before the onset of the credit crunch, according to the Bank of Scotland’s PMI report for February.
Firms continued to recover from weather-related disruption around the turn of the year. Firms raised staffing levels for the first time in four months, albeit at only a modest pace. Although cost pressures slipped from January’s highs, they remained considerable, Bank of Scotland said.
The strongest rise in activity in Scotland in forty-four months was signalled by the Bank of Scotland PMI – a seasonally adjusted index monitoring activity across Scotland’s manufacturing and service industries – rising from 52.9 in January to 55.9. Growth was manufacturing-led, as goods-producers recorded the strongest monthly rise in output since data was first collected in January 1998. Survey respondents indicated that a return to ‘business as usual’ following adverse weather at the turn of the year and growth in new order levels had driven the overall rise.
Panel members reported that improved demand conditions and clients loosening budget controls had driven an increase in new order levels during February. Although weaker than the rise seen across the UK as a whole, new business growth in Scotland was the strongest for a year.
For the first time since last October, Scottish private sector firms raised staffing levels during February. Where job creation was reported, this was linked to increased workloads. Nonetheless, the pace of recruitment was only mild and weaker than the UK average, as a number of panellists reported ongoing company restructuring. The increase in headcount was manufacturing-led.
Service provides maintained current workforce numbers in February.The rise in employment came about despite another overall reduction in levels of outstanding business in February. Manufacturing panel members reported that the reduction of backlogs accumulated during December had been a key reason.
Although slowing on January’s highs, both input and output price inflation remained considerable in February. According to survey participants, strong rises in fuel, food and cotton prices had been the key drivers of input price inflation.
Higher costs and price adjustments following January’s VAT increase were reported to have pushed up charges.
Donald MacRae, chief economist at Bank of Scotland, said: “This is a welcome second month of growth in the private sector of Scotland’s economy following the winter downturn. February signalled the strongest rise in activity across the private sector economy since June 2007
