BUSINESS activity in Scotland returned to growth in the final month of 2016, but the upturn was “only slight”, according to a Bank of Scotland report published today.
The latest snapshot of the economy is featured in the Bank of Scotland’s purchasing managers’ index (PMI) for December.
The index rose from 49.4 in November to its highest level for three months, 50.7 in December.
The PMI report is a monthly survey of carefully selected companies, which provides an advance indication of what is really happening in the private sector economy by tracking variables such as output, new orders, employment and prices across both manufacturing and service sectors.
The PMI report is produced by IHS Markit and features data collected from a panel of around 500 companies based in Scotland, with surveys based on fact, not opinion – they are usually the first indicators of economic conditions each month.
The survey for December shows that private sector firms put their expansion down to a slight increase in new orders and a rebound in job creation. But cost pressures continued to rise too, leading to a faster increase in the prices charged for goods and services.
The report described the expansion as “broad-based” across manufacturing and services but warned that the rate of growth signalled was “only slight”.
December data also pointed to a return to growth in workforce numbers.
Although the rate of job creation was at a four-month high, it remained only “moderate” overall, the report found.
Service providers linked the increase in costs to higher prices for fuel, timber and food, while goods producers reflected on the depreciation of the pound. Subsequently, average selling prices set by Scotland’s businesses rose at their fastest level since April 2011.
Nick Laird, regional managing director at Bank of Scotland Commercial Banking, said: “With output, new orders and employment all returning to growth, and backlogs slowing, Scotland’s economy bounced back at the end of 2016.
“The improvement in business conditions across both the manufacturing and service sectors puts Scotland on a firmer footing as we start the new year.
“Headwinds remain however, principally through the continued increase in input costs, which rose at their sharpest pace for months.
“Given the strain this will place on operating margins, firms throughout Scotland will be looking for this to ease during the year ahead.”
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