GROWTH of the Scottish private sector economy eased in August, with the manufacturing sector achieving faster expansion than services, a survey shows.

Bank of Scotland’s latest Purchasing Managers’ Index (PMI) report also signals an easing of optimism about future growth of output volumes among both manufacturers and services companies north of the Border, although both sectors still project overall expansion on a 12-month timeframe.

Some services companies cited concerns about political uncertainty as a reason for the fall in optimism.

The overall output index for Scotland’s private sector economy fell from 53.8 in July to 52.2 in August on a seasonally-adjusted basis. While remaining above the level of 50 deemed to separate expansion from contraction, the fall in the index signals a significant slowing of growth last month.

Growth in July had been the fastest in 33 months. And Bank of Scotland noted expansion last month was the second-fastest seen in any month since July 2015.

Expansion in the private sector economy in Scotland remained slower than that in the UK as a whole in August. The UK output index dipped from 54.1 in July to 54 in August, but was significantly higher than that for Scotland last month.

Scottish manufacturing growth eased slightly but remained significant, with the output index for this sector dipping from 54.9 in July to 54.2 last month.

Manufacturing growth was significantly firmer than expansion in the services sector. The business activity index for the Scottish services sector fell from 53.6 in July to 51.7 in August.

The pace of growth of new orders for Scottish manufacturers slowed sharply in August. The overall new orders index for this sector dropped from 55.7 in July to 50.7 in August to signal only a modest increase and the weakest rise for five months.

Growth of new export orders for Scottish manufacturers eased slightly but remained significant, with some companies in the sector citing sterling weakness as helpful to their overseas sales.

The survey shows a third consecutive month of employment growth in the Scottish private sector economy in August, although the pace of increase of staffing eased slightly. The employment index fell from 52.8 in July to 52.5 last month.

Both the manufacturing and services sectors recorded slower growth in employment in August than in July.

The survey signals a faster rise in factory gate prices in August. Bank of Scotland noted anecdotal evidence suggested firms were “passing on part of the burden of increased raw material costs” to customers.

The output prices index for manufacturing climbed from 53 to 55.3, to signal a sharp acceleration in the rate of increase of factory gate prices between July and August.

Manufacturers’ input costs increased at a faster pace in August, with this index rising from 61.8 in July to 64.4 last month.

Bank of Scotland said services companies “commonly noted that staff costs had increased”.

Fraser Sime, a director in Bank of Scotland’s commercial banking business, said: “Scotland’s PMI fell to 52.2 in August, from 53.8 in July. Although the most recent figure represented a slowdown in growth, the rate of expansion remained moderate overall, and one of the strongest recorded over the past two years.

“Job creation also remained strong, with many panellists reporting that salaries were being pushed up as a result of the tight labour market.”

Mr Sime added: “Rising staff and raw material costs were key drivers behind the latest increase in price pressures.”