NEARLY half a decade of positive growth in Scotland's economy is set to end, according to figures in an authoritative survey published today.
The latest Purchasing Managers' Index reveals that output rose only modestly north of the Border last month, while levels of new business declined for the first time since June 2003.
And the gloomy prediction from the PMI survey, produced for the
Royal Bank of Scotland, is that the country is heading for "a possible end to the current 57-month period of output growth".
The survey is the most up-to-date indication of the cost to the economy of the economic slow-down which has its roots in the US subprime meltdown and the ensuing worldwide global financial crisis.
In a further finding that demonstrates the pressures that businesses are under as a result of the credit crunch, the survey also reveals "intense inflationary pressure" in the private sector in Scotland. Input price inflation rose to its highest level in more than a decade, prompting a record increase in firms' output prices.
And in response to rapid increases in their average input costs, Scottish private sector companies raised their output prices at the fastest rate in the survey history in March, the report says.
The seasonally-adjusted output prices index rose to a new high of 57.4, broadly in line with the UK-wide figure of 57.5.
Despite the gloom, there is some good news in the survey with overall growth in private sector driven by a continued rise in service sector
output. However, even the detail of this figure reveals that there is little for business to cheer about. The rate of expansion of private
sector activity is the slowest this year and the third-weakest of the current near-five-year period of expansion.
Manufacturing output declined for the first time since June 2003, although only marginally.
But it will be the headline predicted end to the growth – defined as a figure above 50 in the index – which Scotland has been enjoying since July 2003 that will worry politicians at Holyrood and Westminster as well as those in the business world.
According to today's report: "The fall in incoming new business at Scottish private sector firms in March reflected weakening customer confidence and the global slowdown, according to the latest anecdotal evidence. Poor sentiment was in turn related to the housing market and ongoing turmoil in financial markets."
The output index decline was also reflected across the UK, where the figure has fallen from 53.8 in February to 52.2 last month. Scotland is not doing as well as areas of England like the north-west and London, but better than the likes of the midlands and eastern England. Northern Ireland has had a negative output index for all of this year.
The report shows the seasonally-adjusted new orders index was below the no-change mark of 50.0 for the first time since June 2003. In line with the trend seen in the 11 other UK regions, outstanding business in Scotland's private sector economy declined.
And there are further worrying signs in employment, usually a lagging indicator. Average private sector staffing levels in Scotland rose for the 37th successive month in March. However, the seasonally-adjusted employment index eased to 50.6, from February's 52.3, indicating only a marginal rate of job creation.
David Fenton, RBS head of microeconomics, said: "The deceleration in economic activity was in line with the wider UK trend. Manufacturing and technology-related industries seem to be suffering more than most in the Scottish economy, though it is only in seasonally adjusted terms that we actually see reduced levels of activity.
Fenton added: "Slower growth usually leads to weaker inflation pressures. That will come in due course but, for the time being, price pressures are elevated.
"Indeed, input and output prices rose at the fastest rates in the survey history. Unsurprisingly, raw materials were the main factor behind this rising trend."
The full article contains 675 words and appears in The Scotsman newspaper.
