SCOTTISH manufacturers experienced a sharp slowdown in growth of domestic and export sales and orders in the third quarter, a survey has revealed.
The British Chambers of Commerce survey, published today, also shows a slowdown in manufacturing growth in the UK as a whole and highlights the unbalanced nature of the economic recovery.
The readings for Scottish services sector activity for the third quarter are significantly better than those for the preceding three months.
There was a major widening of the sample of services companies in the third-quarter survey. Financial and business services firms were included in a sample which has historically been weighted heavily towards retail and tourism.
Subtracting the proportion of respondents reporting a fall from that experiencing a rise, while adjusting the findings to give larger companies a greater weighting, British Chambers' survey shows respective balances of nine per cent and 11 per cent of Scottish manufacturers achieved rises in domestic sales and orders in the third quarter.
These weighted balances are way adrift of corresponding readings of 50 per cent and 48 per cent in British Chambers' survey of second-quarter activity, and thus signal a sharp slowing of the rate of increase of Scottish manufacturers' sales and orders in the UK market-place.
The survey also shows that growth of domestic sales and orders in the manufacturing sector was significantly slower in Scotland than in the UK as a whole in the third quarter.
Weighted balances of 15 per cent and 20 per cent of Scottish manufacturers achieved rises in export sales and orders in the third quarter. These are down from corresponding weighted balances of 23 per cent and 39 per cent in the second-quarter survey, and signal a sharp deceleration of growth of export business.
The survey indicates manufacturing export orders grew faster in Scotland than in the UK as a whole in the third quarter. But manufacturing export sales rose slightly faster in the UK as a whole than in Scotland.
Meanwhile, the survey shows that there was a slowdown in growth of manufacturers' domestic and export orders and sales in the UK as a whole in the third quarter.
David Kern, chief economist at British Chambers, said: "Increased signs of slower growth and weaker export balances are concerning, and require a forceful policy response. UK growth cannot rely permanently on consumer spending, and on unsustainable current account and budget deficits. Unless investment and net exports make bigger contributions to growth, the recovery will stall."
He urged the Bank of England not to raise UK base rates prematurely.
The survey shows that a weighted balance of nine per cent of Scottish services companies achieved a rise in domestic sales in the third quarter. This contrasts with a weighted balance of five per cent experiencing a fall in domestic sales in the three months to June. A weighted balance of 13 per cent of Scottish services firms reported a rise in domestic orders. This is well ahead of a corresponding balance of three per cent in the previous quarterly survey.
The survey shows slower growth in the Scottish manufacturing workforce in the third quarter. It signals modest employment growth in the services sector north of the Border.
Liz Cameron, chief executive of Scottish Chambers of Commerce, said: "The results of the Q3 survey were mixed for Scotland. Service firms reported a welcome increase in both the domestic sales and orders balances, and this increase explains the upturn in the sector's confidence for the next 12 months. The key manufacturing domestic and export balances fell from the highs seen in Q2, but manufacturers remain generally upbeat about the future."
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