Business activity across the Scottish private sector increased at only a fractional pace during July, according to the latest Royal Bank of Scotland Purchasing Managers Index (PMI) data.
The seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — registered 50.2 in July, down from 54.4 in June, signalling the weakest rate of growth in the current 17-month run of expansion.
Further, new business at Scottish private sector firms fell for the first time since March 2021.
However, employment continued to rise, extending the current period of job creation to 16 months.
The data showed the weakness came mainly from from the manufacturing sector, though service providers in Scotland saw rates of growth for both output and new orders weaken since June.
Private sector firms across Scotland signalled a renewed fall in new orders during July.
While the rate of reduction was mild, it marked the first contraction since March 2021.
The respective seasonally adjusted index was pulled down by a sharp reduction in factory orders across the country, while a weaker upturn in sales was seen at service providers.
Panellists linked the decline to reduced customer spending amid the cost of living crisis and rising economic uncertainty.
Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, said: “The Scottish private sector lost growth momentum for the third month running during July.
“Activity levels were broadly unchanged as the post-pandemic rebound continued to fade and firms faced intense cost pressures and greater economic uncertainty.
“Manufacturing firms in the region noted sharp declines in production and new orders, while service providers reported only mild expansions in activity and sales.
“Encouragingly, employment continued to rise, extending the current period of job creation to 16 months.
“That said, the rate of payroll growth was the softest seen since April 2021.
“While there were signs that price pressures have peaked, costs continued to rise sharply overall.
“Along with signs of weakening demand, an uncertain economic outlook and the cost of living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead.”