Bank of Scotland chief sees double-dip threat falling
- 12 March 2012
- From the section Scotland
The threat of a double dip recession hitting Scotland is "diminishing", according to the Bank of Scotland's chief economist.
The bank's Purchase Managers Index for February showed both output and employment at private sector businesses increased at accelerated rates.
The staff number rise was the steepest in four years, underpinned by increases in recruitment in the service sector.
Meanwhile, a separate survey suggested a "slow recovery" for the economy.
The Federation of Small Businesses (FSB) Index showed business confidence had risen from "record lows" reported at the end of 2011.
Slower than UK
The Bank of Scotland report said the costs of running a business eased for the third month in a row, with service providers and manufacturers both reporting weaker monthly rises in input prices.
The overall rate of cost inflation was the slowest for 17 months but still faster than the UK average.
Overall Bank of Scotland PMI - a seasonally adjusted index monitoring activity across Scotland's manufacturing and service industries - rose from January's mark of 51.4 to 51.7.
It was the fastest rise in business activity for five months but Scottish output increased at a slower rate than across the UK as a whole.
The index numbers are calculated from the percentages of respondents reporting an improvement, no change or decline.
Readings above 50.0 signal an increase or improvement; readings below 50.0 signal a decline or deterioration.
Donald MacRae, chief economist at Bank of Scotland, said: "The PMI was positive for the 14th month in a row in February signalling the private sector of the Scottish economy continues its slow recovery from recession.
"Output grew in both manufacturing and services while employment increased at the fastest rate in four years largely driven by the service sector.
"Growth in new orders was strong in the service sector but new export orders were unchanged from the previous month illustrating the fragility of the eurozone economies.
"These results confirm the diminishing risk of a "double-dip" and increase expectations for a stronger recovery throughout 2012."
Finance Secretary John Swinney said: "This survey shows that Scottish private sector business activity expanded for the 14th consecutive month in February.
"This is the fastest increase in business activity in five months and this is complimented by as a rise in private sector employment for the fourth consecutive month."
He added: "The Scottish government is doing everything it can to support the recovery but the UK government has to take urgent action to promote investment, employment and economic growth."
"I've written to The Chancellor ahead of this week's budget to ask that he considers the introduction of a National Insurance holiday for employers who recruit young people and additional capital investment to provide a targeted economic stimulus."
Meanwhile, the Federation of Small Businesses in Scotland said there was more confidence, despite rising overheads and problems accessing finance.
Overall the index, which surveyed more than 3,000 FSB members across the UK, showed confidence rising for the first time in a year.
The Scottish results of the survey showed small businesses north of the border were more confident than the UK average.
The survey showed "considerable optimism" about businesses' expansion - with a third of firms looking to increase capital investment.
However, the findings also showed these plans to expand could be under threat from rising overheads, weak customer demand and concerns about the cost and availability of finance.
Andy Willox, the FSB's lead on policy in Scotland, said: "It is a testament to the hard work and determination of Scotland's small businesses that, in the face of rising costs and falling demand, they are still more confident about the year ahead and more are looking to expand.
"Government at all levels must bolster this confidence by doing everything in its power to remove the barriers to growth which our members have highlighted."