Business activity in Scotland’s private sector continued to decline in June due to the Covid-19 pandemic, but at a lower rate.
The latest Royal Bank of Scotland Purchasing Managers’ Index (PMI) found coronavirus is “stifling demand and disrupting operations”.
The seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – increased from 21.1 in May to 37.1 in June.
Private sector firms in Scotland reported a further reduction in total new orders during the month.
But they showed an improvement in positive sentiment, with anecdotal evidence linking this confidence to looser lockdown restrictions and hopes of an economic recovery once the pandemic is under control.
Private sector firms continued to cut workforces in June, but the rate of job shedding was the softest for three months.
For the first time since March, the sector recorded a rise in cost burdens last month.
Higher prices at suppliers, greater raw material costs and the added expense of personal protective equipment (PPE) as a result of the pandemic were the main drivers of inflation, according to those responding to the study.
Average prices charged by private sector firms declined during June for the fourth month in a row.
Malcolm Buchanan, chairman of the Scotland Board at Royal Bank of Scotland, said: “Business activity across the Scottish private sector continued to decline markedly during June, with total new orders also falling sharply again.
“That said, the rates of decline eased significantly, with both indices recording record month-on-month rises from May, as looser restrictions allowed parts of the economy to restart.
“Scottish services firms were again worse-affected, with the reductions in both activity and new orders notably faster than those seen for their goods-producing counterparts.
“With both sectors struggling, private sector employment dropped markedly again amid reports of redundancies and lay-offs.
“The 12-month outlook for activity improved for the second month running in June, with the level of positive sentiment approaching the series average.
“Nonetheless, with client demand stifled, the short-term outlook for the Scottish private sector remains challenging.”
The Royal Bank of Scotland PMI is compiled from responses to questionnaires sent to a panel of around 500 manufacturers and service providers.