GROWTH in Scotland’s private sector economy slowed in June as the expansion of the country’s manufacturing sector eased, a key survey has shown.

Private sector output north of the Border grew at a more modest rate last month compared with May, according to the Bank of Scotland’s latest PMI (purchasing managers’ index), published today.

The survey showed that the seasonally adjusted PMI – a single-figure measure of the month on month change in combined manufacturing and services output – fell to 51.1 in June from 51.5 in May. The modest output growth seen in June was below the survey’s historical average.

And the expansion of Scotland’s private sector economy was again slower than seen across the UK as a whole, with the UK PMI measured at 53.8 in June, easing back from 54.3 in May. A reading of 50 on the index is deemed separate expansion from contraction in the private sector economy.

The latest PMI comes just days after official figures showed that the Scottish economy avoided falling into recession in the first quarter of the year. The economy was found to have grown by 0.8 per cent in the first three months of 2017, having fallen by 0.2 per cent in the previous quarter.

Fraser Sime, regional director of Bank of Scotland Commercial Banking, said: “Scotland’s private sector output growth reduced slightly at the end of the second quarter. Manufacturing, which was previously a key driver behind private sector growth, softened in June. The services sector remained subdued overall and with an unchanged rate of expansion since May. However, there was also some positive news. Employment returned to growth and input price inflation further decreased in the latest survey. In addition, June’s data extended the current sequence of expansion to seven months, the longest recorded for almost two and half years. Finally, business confidence fell in June, although to a lesser extent than seen across the UK as a whole.”

While the survey found that manufacturers increased output at a “solid pace overall” in June, the rate of expansion was slower than in the previous month. And production in the Scottish manufacturing sector was founded to have expanded in June at its slowest rate in six months.

Asked to compare levels of output/ production in June with the previous month, 27.2 per cent said levels were higher and 12.5 per cent noted lower levels. That led to a reading of 53.7 on the seasonally-adjusted output index, down from 55.3 in May.

However, while manufacturing expansion eased since May, the survey found that production growth was higher than that of business activity in the service sector, which remained unchanged in June. Some 23 per cent of services companies reported higher business activity, with 16.3 per cent reporting lower levels, leading to a seasonally-adjusted 50.5 on the index.

“The rate of expansion was marginal overall and below the series’ long-run average,” the report said of the services sector.

On jobs, the survey signalled a return to employment growth in June. It found that job creation was broad-based in the manufacturing and services sectors, and faster among manufacturing companies. However, employment growth was weaker in Scotland than the UK as a whole.

Meanwhile, input price inflation remained sharp despite easing slightly, with the rate of increase in cost burdens above the long-term average. The report said there was evidence linking rising input costs to pay pressures and the weak pound. Output price inflation came in at a seven-month low in June, with the average prices charged increasing only moderately.