THE Scottish private sector economy went back into reverse in March as the services sector contracted for the second time in three months, a key survey has revealed.
The survey, published today by Bank of Scotland, signals the economy north of the Border endured much tougher times than that in the UK as a whole in March.
Scottish manufacturers suffered a fall in overall new orders for a third consecutive month, with firms reporting that this reflected subdued demand from the oil and gas industry. The North Sea sector, and the oil and gas industry globally, has been hit by the fall in crude prices in recent months.
Manufacturers in Scotland suffered their sharpest monthly fall in new export orders in three-and-a-half years in March, according to the PMI survey, with unfavourable exchange rates cited as a key factor.
However, the Scottish manufacturing sector achieved what was described as a "fractional increase" in output for a second consecutive month in March.
And Bank of Scotland chief economist Donald MacRae highlighted again the impact of the reduced drink-drive limit north of the Border on the hospitality sector.
The Bank of Scotland PMI (purchasing managers' index) , which measures the month-on-month change in combined manufacturing and services output north of the Border, fell from 50.2 in February to 49.4 in March on a seasonally-adjusted basis.
This took it back below the level of 50 deemed to separate expansion from contraction.
The corresponding March PMI for the UK as a whole is 58.8.
The PMI has now signalled a decline in private sector output in Scotland in two of the last three months. However, the March index for did not signal as sharp a contraction in the economy north of the Border as the Bank of Scotland PMI reading of 47.7 for January.
Mr MacRae said: "March's PMI confirmed a poor month for the private sector of the Scottish economy with marginal growth in manufacturing output not quite offsetting a slight fall in services activity.
"The government sector will have to bear the brunt of growing Scotland's economy in January to March this year. Manufacturing exporters have been affected by the falling euro, while services businesses in hospitality are seeing a changing pattern of spending resulting from the lowered alcohol limit while driving."
He added: "All are affected by subdued business confidence associated with the fall in the price of oil and the bad winter weather."
Mr MacRae last month cited the impact of the recent reduction in the drink-drive limit in Scotland as a key factor in the stagnation of the economy north of the Border during the three months to February.
Presenting the findings of the Bank of Scotland quarterly business monitor last month, Mr MacRae said: "I have been speaking at lots of conferences and seminars and meetings. I am getting some information now that some of the fall in turnover...is down to the reduced alcohol level while driving.
"It is concentrated in travel, tourism and leisure. It seems to be concentrated in that sector. It is particularly linked to hotels and catering, and it is also having most effect in rural areas."
He added: "There has been a reduction in the number of people going out for a meal. If they do go out for a meal, there is one (person) who doesn't drink at all. Before...they might have one, or whatever."
Presenting the findings of the latest PMI survey, Mr MacRae took comfort from a return to overall growth of new business in the private sector economy in Scotland last month.
The new business index rose from 47.7 in February to 51.4 in March.
This rise in new business was driven by the services sector.
The PMI survey signals that employment in the Scottish manufacturing sector rose in March, having fallen in each of the preceding two months. It shows staffing continuing to grow in the services sector.
Looking ahead, Mr MacRae said: "Recovery is on the way with levels of new business increasing, employment rising in all sectors and the oil price up 20 per cent from January's low."
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