Businesses in Scotland are continuing to hire despite an ongoing decline in new business and fresh orders across the manufacturing and services sectors.
The latest Royal Bank of Scotland PMI published this morning has pegged the level of private sector business activity at 47.1 for November. While this was an improvement from the previous month's reading of 46.5, it remains firmly in negative territory below the neutral mark of 50.0 for the third month in a row.
The downturn in output was propelled by a stronger reduction in new orders as underlying demand deteriorated. Manufacturing output fell sharply, with a weaker reduction in services activity.
READ MORE: Business activity in Scotland falls with investments on hold
Nonetheless, firms continued to increase their workforce numbers in November and at the strongest pace recorded in six months. The rate of job creation was robust by historical standards and was said to be underpinned by the successful replacement of leavers, expansion plans, and expectations of growth in new orders in the coming months.
"Businesses across Scotland struggled to raise their activity as waning demand and growing market uncertainty hampered sales in November," said Judith Cruickshank, chair of the Scottish board of Royal Bank of Scotland. "Moreover, with expectations remaining historically muted, the downturn could continue into the new year.
"However, despite the setbacks private sector companies are facing, the labour market remains resilient.
"Employment levels expanded for the tenth month running in November. Moreover, growth in payroll numbers was noted across both the manufacturing and services sectors."
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Inflows of new business fell solidly across Scotland in November to extend the current run of decrease to five months. The rate of contraction quickened from October to the strongest in this latest series of decline.
The sustained decline in new orders led to a further reduction in backlogs in November, with work in hand falling in 17 out of the last 18 survey periods. The rate of depletion eased from October but remained strong.
Panellists reported that waning demand and an uncertain economic environment weighed down on sales, especially across the manufacturing sector. Meanwhile, only a fractional downturn was recorded in new business at the UK level.
That said, firms generally anticipated growth in business activity in the coming 12 months and sentiment improved to a five-month high.
Firms cited increased marketing plans and hopes of stronger demand, as well as stable interest rates and lower inflation. But despite this improvement, confidence remains historically muted and much weaker than the UK-wide average.
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