GROWTH of Scotland’s private sector economy accelerated sharply in July to its fastest pace in 33 months, and employment increased significantly, a survey has revealed.
Bank of Scotland’s latest PMI (Purchasing Managers’ Index) report, published today, shows faster growth in both the manufacturing and services sectors.
It cites anecdotal evidence suggesting the stronger services sector growth has been driven by increased tourism. Services growth, like expansion of overall private sector output north of the Border, was the fastest since October 2014.
Meanwhile, the Scottish manufacturing sector saw renewed growth of incoming export orders.
The overall output index for Scotland’s private sector economy rose from 51.1 in June to 53.8 last month on a seasonally-adjusted basis, moving significantly further above the level of 50 deemed to separate expansion from contraction.
This may raise hopes that the dampening impact on overall Scottish economic growth from the oil and gas downturn is easing.
The pace of economic growth in Scotland in July was only slightly behind that in the UK as a whole. Official figures have, however, painted a weaker picture of overall UK growth than PMI surveys in recent times.
Figures published by the Office for National Statistics show the UK economy grew by only 0.3 per cent quarter-on-quarter in the three months to June, way below its long-term average rate.
The Scottish PMI survey signals the sharpest increase in employment in the economy north of the Border for 31 months.
Both the services and manufacturing sectors recorded continuing growth in their workforces during July.
New orders for the Scottish private sector economy grew in July at the fastest pace since December 2014. The rate of new order growth was greater than the survey’s historical average.
Bank of Scotland said: “Anecdotal evidence suggested a strong level of underlying demand for Scottish-produced goods during the latest survey period.”
Fraser Sime, commercial banking director for Bank of Scotland north of the Border, said:
“July’s survey results signalled the Scottish private sector moving up a gear, as the PMI posted its strongest result in 33 months. This good news was fuelled by the service sector returning to meaningful growth, alongside a faster increase in manufacturing output.”
He added: “Job creation remained positive for the second month running, with July marking the fastest expansion in employment in over two-and-a-half years. Employment growth was consistent across the manufacturing and service sectors.”
However, the survey showed sterling weakness in the wake of the Brexit vote has continued to push up companies’ costs sharply.
The pound’s woes have led to a surge in annual UK consumer prices index inflation, which has risen from 0.3 per cent in May 2016, just ahead of the Brexit vote, to 2.6 per cent.
Scottish services firms highlighted the impact of wage inflation on their costs in the PMI report.
Manufacturing firms in Scotland cited the exchange rate as the primary cause of their increased input costs.
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