Scotland avoiding double dip

Scottish manufacturers in November saw the strongest rise in production since August as new orders hit a three month high and overseas demand from the US and China boosted activity.

But Bank of Scotland’s purchasing managers index also recorded a decline in the private sector economy as new order levels and employment fell.

Overall weakness focused on the service sector as goods producers posted a stronger performance in terms of both output and new business flows over the month.

Scottish firms recorded a third straight monthly decline in activity at their business units during November, although the pace of contraction was modest. Where lower output was recorded, this was often linked to falling order levels.

Survey respondents indicated that subdued demand and adverse weather conditions had led to a modest drop in the volume of incoming new business received in November. This extended the current period of decline to two months.

Latest data highlighted a further rise in average costs faced by private sector firms. Although inflation was weaker in November than October, it was stronger than both the one-year and long-run series averages. Higher raw material, fuel and wage costs were reported as key drivers of inflation.

Firms were able to pass on only some of the rise in average costs to clients in the form of higher charges in November. Manufacturers raised factory gate prices at a marked rate while discounting remained evident in the service sector.

Donald MacRae, chief economist at Bank of Scotland, said: "This month's robust recovery in manufacturing partially offset the fall in service activity extending the slowdown in the Scottish economy into November.

"Scottish manufacturers saw a welcome strong increase in the volume of new export orders during the month providing evidence of an export led recovery. The sector also recorded a solid rise in production, the strongest since August.

“Weakness was focused on the service sector with the business services and travel, tourism and leisure sectors all seeing declines in activity. However, financial services recorded a modest rise.

"While the latest PMI isn't as positive as hoped for, these results indicate the Scottish economy is avoiding a ‘double dip' and experiencing low growth rather than negative growth.”