SCOTLAND’S private-sector economy contracted again last month, and the rate of decline quickened again after slowing in December, a survey shows.
Royal Bank of Scotland’s latest PMI (purchasing managers’ index) report, published today, also shows private-sector employers north of the Border reduced their overall headcount for a second consecutive month in January. In the UK as a whole, a flat overall position in employment was reported by companies for last month.
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The business activity index for Scotland dropped from its five-month high of 48.3 in December to 47.1 in January on a seasonally adjusted basis, falling further below the level of 50 deemed to separate expansion from contraction to signal a faster pace of decline. This index measures combined manufacturing and services output.
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A sharp contraction in new business across the Scottish private sector was recorded for January.
Royal Bank said: “The downturn was led by a faster fall in new business received at service providers, while goods producers reported the softest decline in eight months. A slow housing market, transport strikes and squeezed disposable incomes were all in part blamed for the drop in new orders.”
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Scotland experienced the sharpest contraction in new business of the 12 nations and regions of the UK in January, according to the survey.
Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “The start of the year revealed that the downturn in Scottish private-sector activity that began last August was extended into 2023. Moreover, the... decline in private-sector activity accelerated. It seems unlikely that the sector will bounce back anytime soon as services firms were severely impacted by the depressed demand conditions and the current economic climate.”
She added: “The step back in client activity has also resulted in firms trimming their workforce numbers for the second month running. Alongside an ongoing drop in the level of unfinished work, a further reduction in payroll numbers can be expected.
“However, the latest figures indicate that perhaps the worst of inflation has passed. Nonetheless, the current rates of input-price and output-charge inflation are still elevated and can be detrimental to the health of the Scottish private sector.”
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