After the panic of last month’s figures for the Scottish Economy (the UK economy as a whole for that matter), there are clear signs that things are returning to normal. The latest Bank of Scotland PMI report suggests that the Scottish private sector economy returned to growth, albeit modest, during the first month of 2011, following the snow-covered end to 2010.
The January figures may have shown the strongest increase since last August, but the signs are that, when averaged over December and January, the production lost at the end of last year was not fully made up in January. There’s also a concern about inflation. Both input costs and output prices rose at their fastest since the financial crisis began.
Indeed, the report shows that price pressures accelerated sharply during the first month of 2011. It says this was “driven by a combination of higher fuel, energy and food prices. The need to pass on rising costs, alongside the adjustment of charges in line with higher sales taxes, led to the strongest rise in average output prices for twenty-eight months.”
Scotland’s position may have improved; but it’s still well behind the rest of the UK. Not only that, the country’s continuing to haemorrhage jobs in the private sector for the third straight month. Again this contrasts with the rest of the UK where there’s been a slight increase in the number of people employed.
There has also been a growing split between the manufacturing and service sectors. The report shows “robust growth” in companies producing physical goods while service industries reported “solid cuts”. The Bank adds that, where staff numbers were reduced, firms reported that this was primarily driven by low workloads.
According to Donald MacRae, Chief Economist at Bank of Scotland, “the Scottish private sector economy made a return to growth in January reducing fears of a "double dip" and increasing expectations for a continuing recovery in 2011. During the month, the volume of new business received from export markets rose at the fastest pace since last June.
“Manufacturing companies increased their staffing levels further, extending the current period of job creation to one year. Overall new orders rose for the first time in four months, although the Index pointed to only a mild rise.
“Particularly welcome is the return to growth in all three service sectors: business, financial and travel, and tourism and leisure. However, the sharp increase in input prices highlights the threat from high levels of cost inflation. 2011 looks like being a year of low growth rather than no growth.”
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