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Scottish economy continues climb out of recession

10 May 10 00:19 GMT

The Scottish economy continued to climb out of recession last month despite suffering from the impact of the Icelandic volcano, figures have shown.

Employment levels, activity and new orders rose in April, the latest Bank of Scotland Purchasing Managers' Index (PMI) report said.

However, it said the pace of recovery was slowing and the turnaround in the economy remained fragile.

The transport sector was among the worst hit by the volcanic ash cloud.

Anecdotal evidence from the survey suggested that a number of firms operating in the service sector had suffered as a result of the Eyjafjallajokull volcano, which caused the closure of UK air space last month.

The report said strong growth in manufacturing output and new orders were mostly offset by modest declines in the service sector.

There was also a fractional rise in new orders in the Scottish economy, the ninth in the past 10 months.

Donald MacRae, chief economist at Bank of Scotland, said: "While the Scottish economy is on the right track, as underlined by a rise in overall activity and new orders, the recovery has cooled since March.

"Rising costs indicate that inflationary pressures have not gone away and a marked divergence in the performance of the manufacturing and the services sectors remains.

"However, the Scottish economy continues to climb out of recession."

Fuel costs

The report showed staffing levels in the Scottish private sector rose for the third month in a row during April.

Those in the manufacturing sector who responded to the survey also said staffing levels were higher and this had let them work through backlogs.

Overall backlogs decreased for the 32nd straight month.

Cost inflation was once again higher in Scotland than the rest of the UK for the 23rd month in a row.

Companies said this was down to rising fuel, wage and raw material costs.

These sharp increases led Scottish firms to raise tariffs at the fastest pace in 18 months.

The Bank of Scotland PMI, compiled by Markit for the Bank of Scotland, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in about 600 private manufacturing and service sector companies.

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