Technology slips into reverse as Scottish growth slows
THE pace of business activity in Scotland slowed in February, according to the latest PMI report.Financial services and tourism-related firms north of the Border posted faster growth and increasing levels of employment, the survey reveals.
But business services and the technology, media and telecommunications sectors decelerated sharply, with the latter slipping into reverse gear for the first time since 2003.
Although output growth in manufacturing eased only marginally since January, survey data suggested growth was sustained only through the completion of existing contracts.
The volume of new orders in manufacturing declined for the second month running, while the survey, out today, shows backlogs continued to fall at a pace that was stronger than the average for 2007. Business output level dropped to 52.1 – down slightly on last month and behind the UK as a whole at 53.9. The incoming new business index declined to 50.7 in February, from 51 the previous month.
The latest figure signalled only a marginal expansion of new work in Scotland's private sector economy and the weakest increase in the current 56-month period of growth.
Data also pointed to the second-fastest increase in average input costs in the survey's
ten-year history in February,
with the rate of inflation only just shy of January's peak. Firms faced a wide range of inflationary pressures including fuel, utilities, wages and raw materials.
On a more positive note, rate of workforce growth was the strongest since last August, suggesting that firms may expect business requirements to rise over the coming months and are expanding accordingly.
RBS senior economist David Fenton said: "The pace of activity slowed in February. However, there was a marked difference in the performance of different sectors." He added: "Rising input costs are clearly a prominent issue for Scottish businesses. The higher oil price was cited as a key factor, with rising transport costs and wage pressures added to the mix.
"Companies also reported higher output charges, but not to the same extent, possibly reflecting a loss of pricing power at a time of slower growth."