Bank of Scotland PMI report for March: Scotland’s private sector economy ended the opening quarter with another strong month of growth

  • March sees marked growth in manufacturing and service sector output
  • Rate of job creation is solid but slower than in February
  • Cost inflation drops to 54-month low

Edinburgh, Scotland, 15-4-2014 — /EuropaWire/ — Scotland’s private sector economy ended the opening quarter with another strong month of growth, according to the Bank of Scotland PMI report for March. Improving business conditions and confidence supported increases in output and new business, in turn leading companies north of the border to bolster payroll numbers. March data meanwhile highlighted a cooling of inflationary pressures as both input and output prices rose at slower rates.

At 56.4, up slightly from February’s mark of 56.2, the seasonally adjusted headline Bank of Scotland PMI – a single-figure measure of the month-on-month change in combined manufacturing and services business activity – signalled further strong growth of business activity in March. Moreover, the index’s quarterly average improved slightly from the final three months of 2013. Growth was broad-based across manufacturing and services in March, with the former seeing a pick-up from only a modest pace of expansion one month before.

March’s increase in business activity was underpinned by another solid increase in the level ofincoming new work, which panel members attributed to generally healthier business conditions and improved confidence. There was also mention of new work inflows being positively influenced by growth in the housing market. New export orders at manufacturers declined for a second straight month, however.

Scotland’s labour market continued to reap the benefits of improving business conditions, withemployment rising for the sixteenth straight month. Although the rate of job creation eased from February’s series-record high, it nevertheless remained solid and was the second-fastest since the survey began in January 1998.

Placing added pressure on firms to expand staff capacity was a faster increase in backlogs of work, the most marked in 2014 so far.

March’s survey signalled a notable easing in the rate of cost inflation faced by private sector companies in Scotland, to the slowest since September 2009. Anecdotal evidence highlighted the impact of a dip in fuel prices and strong competition among suppliers.

Similarly, output prices rose at a slower rate in March. This reversed an upward trend in charge inflation which had previously reached a 31-month high in February.

Donald MacRae, Chief Economist at Bank of Scotland, said: “The March PMI signalled further strong growth of business activity across both manufacturing and service sectors. Not only did the level of new orders increase but employment rose for the sixteenth month in a row, while cost pressures eased.  New export orders fell for the second consecutive month illustrating the challenge of improving our trade performance. The Scottish economy has added another month of expansion further embedding the growing recovery.”

Component Summary
Output / Business Activity
Growth of business activity in Scotland’s service sector remained strong at the end of the first quarter. March’s increase in activity was the thirty-ninth in successive months. Manufacturing output growth meanwhile rebounded from the modest rate seen in February, although remained slightly slower than
January’s high. Factory production has now increased in 11 of the past 12 months, with November’s stagnation being the only break in this sequence.

New Business
The inflow of new work into the service sector increased during March, stretching the current sequence of growth to 19 months. The rate at which new business levels rose was the slowest since December, but nevertheless marked overall and well above-trend. Manufacturers operating in Scotland also recorded increase in incoming new orders in March, extending the current sequence of expansion to 15 months. However, the rate of growth eased further from the marked pace recorded at the start of the year, to one that was only modest and the slowest in ten months.

Outstanding business levels at services firms continued to rise during March, and at a solid rate that was unchanged from that recorded in the preceding survey period. The current sequence of backlog accumulation now extends to 12 months. March’s survey pointed to an eighth successive monthly decrease in the amount of work-in-hand at manufacturers. The rate of decline was only modest, however, and the weakest since last August.

Input prices
March saw the rate of input price inflation in the service sector ease sharply, to its lowest level since October 2009. Anecdotal evidence suggested that lower fuel prices and competition among suppliers dampened overall input price inflation, partly offsetting the impact of higher food and labour costs. Similar to their counterparts operating in the service sector, manufacturers faced a slower rate of input price inflation in March. Cost burdens in fact rose to the smallest extent in over a year-and-a-half.

Output prices
Service providers’ selling prices increased at a slower rate in March. Having hit a three-year high in February, charge inflation moderated at the end of the opening quarter to the weakest since last November. Whereas charge inflation in the service sector eased in line with the trend in cost pressures, factory gate prices increased faster in March. Manufacturers’ selling prices in fact rose more markedly than average input prices.

The upturn in business activity at services firms had a positive impact on the labour market, with companies in the sector adding to their payrolls for the twenty-second straight month amid attempts to keep atop of increased workloads. Although less marked than February’s survey record, the overall rate of job creation was still solid in the context of historical survey data. In contrast to the trend observed in the service sector, employment at manufacturers increased at a faster rate in March. In fact, job creation was the strongest in the history the series dating back to the start of 1998. Among those manufacturers that reported a higher level of employment than one month earlier, there was frequent mention of temporary and part-time staff being recruited.

The Bank of Scotland PMI is compiled by Markit for Bank of Scotland and is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 600 private manufacturing and service sector companies. The panel has been carefully selected to accurately replicate the true structure of the Scottish economy.

Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) numbers, first published seasonally adjusted series and subsequently revised data are available to subscribers from Markit. Please contact

About Bank of Scotland
Bank of Scotland is part of Lloyds Banking Group, the UK’s largest retail bank and Scotland’s largest financial services employer. Established in 1695, Bank of Scotland is the UK’s oldest surviving clearing bank. Our goal is to be the best financial services provider in Scotland. We believe this means we must build a leadership position not on the basis of scale but on the foundations of reputation and recommendation.

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For further information, contact: 
Zoe Redhead, Bank of Scotland Press Office
Tel: 0131 655 5405 / 07809 551491

For technical enquiries, contact: 
Phil Smith,
Tel: 01491 461 009

Compiled by Markit for Bank of Scotland, this report is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 600 private manufacturing and service sector companies. The panel is carefully selected to accurately replicate the true structure of the Scottish economy.

The intellectual property rights to the Bank of Scotland PMI provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent.
Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Bank of Scotland use the above marks under license. Markit is a registered trade mark of Markit Group Limited.


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