THE private sector economy grew more slowly in Scotland last month than in the UK as a whole, as the pace of expansion north of the Border eased slightly from June's 73-month high, a key survey reveals.

Employment in the Scottish private sector continued to rise, but the pace of recruitment slowed.

Bank of Scotland's main PMI for Scotland, which measures output, fell from 57 in June to 56.7 in July on a seasonally-adjusted basis as growth of the dominant services sector eased but expansion in manufacturing accelerated.

Although the July reading was well above the level of 50 which is calculated to separate expansion from contraction in the survey, which is conducted by financial information company Markit, it was well adrift of the corresponding figure of 59.8 for the UK as a whole.

In June, the private sector economy had grown slightly faster in Scotland than in the UK as a whole. However, the UK output index rose sharply in July, from 56.6 in June, to signal a significant acceleration of the pace of expansion.

July was the second consecutive month in which Scotland's private sector economy has enjoyed a record pace of increase in new business. The new business index climbed from 57.7 in June to 58.5 in July. The Scottish employment index fell from 52.5 in June to 52.1 in July - to signal an easing in the pace of growth of the private sector workforce in Scotland. There was an acceleration in the rate of increase of the Scottish manufacturing workforce.

However, the rate of employment growth in the dominant services sector slowed in July from June's 14-month high.

Although the pace of increase in activity in Scotland's dominant services sector eased in July, it remained sharp. The services activity index fell from 57.2 in June to 56.3 in July, but remained well above the 50-mark. The business services sub-sector continued to lead the advance in activity.

The Scottish services sector enjoyed an acceleration in the pace of increase in new business in July, to its fastest rate since March 1998.

The Scottish manufacturing sector output index, meanwhile, jumped from 56 in June to 58.1 in July. This reading signalled the second-fastest monthly growth in manufacturing output north of the Border since comparable records began at the start of 1998.

Bank of Scotland noted Scottish manufacturers had enjoyed monthly growth in new orders which was not far short of the fastest in the survey's 15-year history. Manufacturers cited increased market confidence and a better performance by the construction industry as factors which had driven this rise in new business.

The survey shows that manufacturers enjoyed their first rise in export orders in five months in July. The new export orders index rose from 48.5 in June to 50.8 in July.

Donald MacRae, chief economist at Bank of Scotland, said: "July's strong PMI reading signalled the Scottish economic recovery continues. Both manufacturing output and services activity increased in the month, with services firms experiencing the fastest rise in new work in over 15 years."

He added: "July saw a return to growth in new export orders for the first time in five months. Business confidence is clearly on the increase, with employment rising for the eighth month in a row."

Mr MacRae declared the recovery would become even more embedded if firms increased investment.

The PMI Scotland report shows an acceleration in the rate of increase of prices charged by Scottish services companies in July, as they faced continuing high cost inflation. Scottish manufacturers raised their prices in July, for the sixth time in seven months.