The Scottish private sector economy returned to growth in October with a steadying of new business levels and a rise in employment.
The Bank of Scotland monthly PMI survey found the service sector dragging the economy back into positive territory after the relative slump in September.
The PMI index, which measures the change in the combined service and manufacturing sectors, jumped back above the 50 reading which indicates growth.
Donald MacRae, chief economist at Bank of Scotland, said: “October’s PMI was 50.9 showing a welcome recovery from September's 49.0. Output increased modestly in services and marginally in manufacturing. “
For Professor MacRae it was a brighter final survey ahead of his retirement from the bank after 30 years at the end of this month. He added: “These results confirm the summer slowdown in the Scottish economy has been arrested giving slow growth rather than no growth going into the third quarter of the year.”
Volumes of new business at Scottish private sector companies stabilised in October, with incoming new orders broadly unchanged having fallen in September. Growth of new business in the service sector was partly offset by a decline at manufacturers, who lower volumes of new orders from both domestic and foreign clients.
Workforce numbers rose, extending the current sequence of growth to three months. However, the rate of job creation eased since September and was marginal overall. Rising employment was driven by service providers, who linked increases in headcounts to stronger demand.
Outstanding business at Scottish private sector companies continued to fall in October. Backlogs of work have declined in every month since January, providing evidence of ongoing spare capacity in the sector.
Average input costs rose further as the rate of inflation hit a four-month high, but entirely driven by the service sector, as manufacturers’ purchase prices fell again.
Average tariffs however continued to slip lower, across both sectors of the economy. Output prices have now fallen in each of the past three months.
Meanwhile prospects for UK growth in exports – vital to the Scottish economy -are weaker than expected, according to the Confederation of British Industry as it begins its annual conference in London today.
The CBI’s quarterly economic forecast has more than halved its prediction for export growth in 2015, from 4.5per cent to 2.2 per cent. In 2016 growth will be limited to 2.2 per cent, the forecast again slashed from the 3.4 per cent predicted only three months ago in August.
The business group has downgraded its growth estimate for 2015 to 2.4per cent, from 2.6 per cent, due to weaker investment growth, and for 2016 to 2.6 per cent from 2.8 per cent.
It has also unveiled its first forecast for 2017, predicting “solid UK growth at 2.4 per cent”.
CBI director-general John Cridland says following recent comments from the Monetary Policy Committee the forecast has pushed back its expectation for an interest rate rise to the second quarter of next year, from the first.
But he says: “The UK economy’s continued strong performance is a clear sign of its resilience in the face of turbulent times overseas.”
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