Scottish private sector companies hire more staff as output in manufacturing and services increases slightly in July

Companies in the Scottish private sector continued to hire additional staff in July even though demand in the sector slowed down, a new report has revealed.

The latest Bank of Scotland Purchasing Managers' Index (PMI) report showed that an increase in staff recruitment at service providers drove the rise in employment, while the overall rate of job creation remained roughly the same as in June and was in line with that of the UK economy as a whole.

The data shows that there was a slight increase in output in Scotland's manufacturing and services sectors last month, which contrasts with a reduction in output at the UK level.

However, the rate of growth was slower than that recorded in June because of a decrease in incoming new business.

As a result, the PMI index, where a reading above 50 indicates growth or expansion, fell from 52.5 in June to 51 last month. The report also showed that input cost inflation rose to a rate that was much higher than that seen across the UK as a whole.

There was another increase in activity among service providers, while goods production saw the sharpest reduction since the beginning of last year.

After a continuous expansion in the volume of new work placed with Scottish private sector businesses since last December, the report recorded a slight reduction in July as new orders in the manufacturing sector fell at such a high rate that it offset the slight growth seen in the services sector.

However, the drop in new orders meant that companies could focus on reducing their backlogs of work, which led to backlogs falling for the eleventh month in a row and by the sharpest rate of clearance since April.

Donald MacRae, chief economist at the Bank of Scotland, commented on the report: "The July PMI suggests growth in the private sector of the Scottish economy was marginal with a fall in manufacturing output offset by continuing growth in service activity.

"The Scottish economy is struggling to maintain growth momentum in the face of the global slowdown. Low or no growth is in prospect for the rest of 2012."

Copyright Press Association 2012