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Cost pressures remain

Activity picks up as order books rise

tradesmanBusiness activity in Scotland returned in December, supported by a slight increase in new orders and a rebound in job creation.

However, cost pressures continued to rise, leading to a faster increase in the prices charged for goods and services, according to the latest Bank of Scotland Regional Purchasing Managers’ Index (PMI).   

The expansion was broad-based across Scotland’s manufacturing and service sector, with panel members linking this to stronger underlying demand.   

The increase in new business in December ended a two month sequence of decline. The rate of job creation hit a four-month high.

However, the rate of inflation quickened to a 67-month high and continued to outstrip the historical average.

Service providers linked the increase to higher prices for fuel, timber and food, while goods producers reflected on the depreciation of the pound. Subsequently, average selling prices set by Scotland’s businesses rose at their fastest level since April 2011. 

Nick Laird, regional managing director, Bank of Scotland Commercial Banking said: “The improvement in business conditions across both the manufacturing and service sectors puts Scotland on a firmer footing as we start the New Year.

“Headwinds remain however, principally through the continued increase in input costs, which rose at their sharpest pace for 67 months.

“Given the strain this will place on operating margins, firms throughout Scotland will undoubtedly be looking for this to ease during the year ahead.”

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