THE growth rate in Scotland's private sector economy fell to a four month low in August as firms found new business increasingly hard to come by, a closely-watched survey has shown.
The latest Bank of Scotland PMI report suggests the economic recovery lost momentum in Scotland last month when the headline output index reading fell to 54.6 from 56.8 in July.
The reading was the lowest since the 54 recorded in May, although comfortably above the 50 mark that separates expansion from contraction.
Growth in Scotland trailed below the rate recorded across the UK.
Bank of Scotland said both the services and manufacturing sectors made appreciable contributions to overall growth in August.
However, services firms appear to have faced tougher trading conditions than they had for some time.
The rate of growth in activity in the sector was the lowest in 16 months.
Growth in new business slowed to the lowest rate in around 18 months.
This may suggest the bounce in activity that followed the recession which was triggered by the financial crisis is easing.
Bank of Scotland said the main area of weakness was in travel, tourism and leisure, which recorded a decrease in new work for the first time in 15 months.
The strength of the pound may be deterring visitors from overseas.
The manufacturing sector fared better, increasing output for the third month in succession and at the fastest rate since March.
The bank found manufacturers recorded a further marked increase in overall new orders. They have increased orders for 20 months running.
However, the level of new export orders fell for the eighth time in the past 10 months.
The bank said anecdotal evidence suggested the strength of the pound caused problems for exporters.
Last month Scottish Engineering reported that the engineering sector had suffered its first fall in orders in six quarters.
This was amid tough conditions in export markets such as the Eurozone.
The PMI research found pressure on margins increased in Scotland as firms faced renewed cost increases.
The headline output index reading in the UK increased to 59.3, from 58.6 in July.
The gap between the overall growth rate in Scotland and the UK widened to 4.7 points in August, from 1.8 in July.
However, businesses in Scotland outperformed marginally in the job creation stakes, with a reading of 54.5 compared with 54.1 for the UK. Manufacturing and services firms increased staffing numbers in response to increased workloads.
Donald MacRae, Chief Economist at Bank of Scotland, noted: "Employment rose at the fastest rate for six months confirming continuing high levels of business confidence."
Separately BDO found confidence among UK businesses fell for the first time in six months in August.
This was attributed to a steep decline in manufacturing optimism.
Martin Gill, head of the accountancy firm in Scotland, said: "With anaemic growth enduring in our key trading partner - the Eurozone - and external shocks such as the crisis in Ukraine further dampening confidence, no-one should be surprised to see growth impacted in H2 2014."
The PMI activity index for services in Scotland fell to 54.4 in August, from 57.2 in July.
The services new business reading fell to 51.4 from 56.1.
The manufacturing output index rose to 55.7 from 55.3.
The manufacturing orders index increased to 56.8 from 55.1.
In addition, new export orders fell to 48.4 from 49.
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