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Private-sector boom time sees jobs surge

The Scottish private-sector economy rebounded in June and jobs grew at the second-fastest rate in the 16-year history of the Bank of Scotland's monthly survey.

JOBS CREATED: Growth and confidence in the manufacturing and services sectors are up, according to the bank's survey.
JOBS CREATED: Growth and confidence in the manufacturing and services sectors are up, according to the bank's survey.

The PMI index ticked up to 55.9, having dropped in May to a 13-month low of 54.0, driven by upturns in both manufacturing and services. Any reading above 50.0 represents an overall expansion of private-sector output. Exports rallied after four months of decline.

"Business activity rose at the fastest pace in three months as manufacturers and services firms alike recorded accelerated expansions in output," the report said. "There was further good news on the employment front, with firms upping their rate of job creation to accommodate stronger inflows of new work. Elsewhere, June's survey showed slight upticks in the rates of both input and output price inflation."

The seasonally adjusted headline Bank of Scotland PMI - the single-figure measure of the month-on-month change in combined manufacturing and services business activity - climbed to a three-month high, and rates of growth in service- sector business activity and goods production were both the fastest since March.

Underpinning growth was a stronger inflow of new business at Scottish private-sector companies, and anecdotal evidence suggested the success of increased marketing efforts in driving new business growth. Meanwhile, new export orders at manufacturers stabilised in June, a relative positive after four successive months of declining international sales.

As growth regained some of the momentum lost earlier in the quarter, employment rose strongly, and at the second-fastest rate since the survey's inception in 1998. Driven by both the manufacturing and service sectors, the speed of job creation was the most marked since February's record high.

The June data pointed to a pick-up in the rate of input price inflation, the fastest since February, with salary increments the main factor.

Businesses raised their output prices to cover at least part of the burden of higher costs. The scale of increases in June was slightly more marked than in May, though only moderate and slower than the rate of cost inflation. Overall, inflationary pressures in Scotland remained higher than across the UK as a whole.

Donald MacRae, chief economist at Bank of Scotland, said: "Growth was evident across manufacturing and services with business services leading the way. New export orders stabilised while levels of new business rose across the economy. Employment growth was accompanied by rising salaries providing further evidence of increasing business confidence. The recovery in the Scottish economy is now firmly embedded."

Last week PwC revised its prediction for Scottish GDP growth this year upwards from 2.4 per cent to 2.8 per cent. The Fraser of Allander Institute forecast released last month predicted a 2.4 per cent rise across 2014, well above the 1.6 per cent in 2013.

The PMI index across the English regions hit 58.5 in June, signalling growth for the 20th successive month. A small fall in the index from 59.8 last month suggests that the pace of growth has slowed slightly from its recent peak to the weakest since March. Companies across the North East (64.8) saw the strongest output expansion, followed by those based in the South West (59.4) with the weakest showing in the West Midlands (57.6). In Wales the business activity index picked up from the four-month low seen in May (58.2) to reach 59.3 in June.

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