SCOTLAND's private sector economy slipped into reverse in January when bad weather took a heavy toll on firms in industries such as travel and tourism.
Research for the latest Purchasing Managers Index from Bank of Scotland found business activity fell in Scotland last month ending a period of unbroken expansion that started more than two years ago.
The headline index reading fell to 47.7 in January from 52.8 in December. This was the headline index's first sub-50 reading, signalling contraction, since September 2012.
Donald MacRae, chief economist at Bank of Scotland, highlighted the impact of bad weather in a month when activity dropped in both the manufacturing and services sectors .
He said: "The first month of 2015 has given the recovery in the Scottish economy a sharp, weather-related jolt reminiscent of the bad weather effect of four years ago. "
The PMI suggests Scotland was hit much harder than other parts of the UK. The headline index reading for the UK increased to 56.7 in January from 55.3 in December.
Scotland's key services sector was hit especially hard.
Bank of Scotland found the level of business activity in services fell in January. This was the first fall in more than four years.
Noting anecdotal evidence concerning the effect of bad weather, the bank said the worst-performing sector was travel, tourism and leisure, which recorded a sharp decrease in the level of business activity compared with December.
The manufacturing sector recorded a marginal fall in output, ending a three month sequence of modest growth. Some respondents cited disruption caused by severe bad weather.
Manufacturers reduced staff numbers overall for the first time since January 2013, amid some reports of weakness in new orders.
However with services firms continuing to create jobs, albeit at the slowest rate in almost two years, overall employment remained steady. The index reading of 50 compared with 54.4 in December.
The services and manufacturing sectors combined recorded a marginal increase in new business, with an index reading of 50.1, down from 53.8.
The results overall create the impression the recovery in the private sector economy ran out of steam in January. Development experts will hope the February PMI confirms that the slowdown in January was a weather-related blip.
However, deputy first minister John Swinney put a positive gloss on the figures.
He said: "It is encouraging that employment and new orders remained stable, which suggests we should see some bounce back in coming months."
Mr Swinney highlighted the fact that the report found manufacturing firms reported a solid rise in exports sales.
This was the first increase in manufacturing export orders since June last year. The increase was the strongest since May 2012.
Mr Swinney noted firms also reported feeling the benefits of lower cost pressures, particularly in their fuel costs.
The input prices index fell to 52.3 in January, the lowest level since May 2009. It read 54.5 in December.
The services business activity index fell to 47.1 in January from 53.3 in December.
The services new business reading fell to 50.7 from 54.8.
The sector employment index fell to 50.9, from 55.1.
The manufacturing output index fell 49.6 in January, from 51 in December.
The sector orders index fell to 47.8 from 50.3. However, the export orders index increased to 52.6 from 49.1.
The manufacturing employment index fell to 46.8 from 51.8.
The overall UK index new business index increased to 57.5 from 56.4.
The UK employment index rose to 56.3 from 54.5.
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