Service Sector Growth Lifts Outlook

Business activity across Scotland increased last month, thanks to growth in the service sector, a new survey has found.

The Bank of Scotland PMI study for April said activity levels in the service industry were gaining new business and returning to modest growth''.

But in contrast to this it said output in the manufacturing sector had fallen for the second month in 2015, suggesting this was largely reflective of another decline in new orders''.

Manufacturing firms who were surveyed for the research reported weak demand from the eurozone and general election uncertainty at home''. With output levels having fallen there was amarginal decline in employment'' in the sector, with this being the third time in the past four months that manufacturing staffing levels a dropped.

In the service sector there was a net rise in employment for the 35th month in a row. The report said that the rate of increase was modest, however, and a little slower than that seen in March''.

Donald MacRae, chief economist at Bank of Scotland, said: April's PMI signalled a return to growth in the Scottish economy. However, the expansion was marginal and confined to the services sector with manufacturing exporters suffering from the effects of low growth in the eurozone.''

He added: The slowdown of the first three months of this year is slowly being reversed with both employment and new business increasing in April, suggesting a return to a more normal growth rate in the second quarter.''

A Scottish Government spokesman said: We welcome the April PMI figures which indicate that the second quarter of 2015 has gotten off to a positive start in Scotland's economy. The PMI signalled a modest expansion in output as well as further growth in new business and another positive reading for employment.

However, the survey also highlighted that conditions continue to be challenging for exporters in the manufacturing sector in light of the strength of the pound and weak demand from the euro area. That said, the stronger pound also means cheaper imported inputs which helps keep costs down.

These figures follow on from recent labour market statistics which showed the highest number of people in employment since the pre-recession peak in employment levels in March-May 2008, as well as Scotland outperforming the UK as a whole in terms of employment and inactivity rates. There is no doubt that the recovery in Scotland is progressing.''