Scotland’s private sector firms hired workers at the fastest rate for 17 months and put their prices up to a 25-month high in August, according to latest purchasing managers’ index (PMI) report from Bank of Scotland.

However, Scotland’s private sector also contracted slightly for the second consecutive month.

Output and new orders fell slightly across Scotland’s manufacturing and service sector, while outstanding business levels were also down.

The seasonally adjusted headline Bank of Scotland PMI — a single-figure measure of the month-on-month change in combined manufacturing and services output — slipped to 49.1, fractionally lower than July’s 49.2, and the lowest since March 2016.

Service providers said the current downturn in the oil and gas sector led to a modest decline in their business activity.

Production rose slightly according to manufacturers.

Average cost burdens faced by Scotland’s private sector continued to increase.

The rate of inflation also quickened to a four-month high with some evidence that the rise reflected higher import costs.

Nick Laird, regional managing director, Bank of Scotland Commercial Banking said: “Scotland’s economic performance continued to face headwinds during August, as the private sector remained in contraction.

“Both output and new business fell for the second month in a row, while Scottish firms faced further cost pressures.

“It was good news for jobs and selling though with the rates of increase in workforce numbers and output prices both up to 17-month and 25-month highs respectively.”