Scotland faces a year of low or no growth after the rate of expansion in the private sector economy slowed in July.
The chief economist of Bank of Scotland, Donald MacRae, said the latest edition of its closely watched PMI (Purchasing Managers Index) showed Scotland made little headway in the face of tough conditions in global markets last month.
The reading for the composite output index fell to 51.0 in July from 52.5 in June, taking it alarmingly close to the 50 mark that separates expansion from contraction.
The findings of the PMI show problems in key export markets such as the eurozone are taking a heavy toll on the manufacturing sector, which ministers hope will expand to help rebalance the economy. They are also making life difficult for businesses in the key tourism sector and related industries.
Coming weeks after Scottish Government data confirmed the country returned to recession in the first quarter of 2012, they could weaken confidence in the prospect of the private sector powering a rapid recovery north of the Border.
"The Scottish economy is struggling to maintain growth momentum in the face of the global slowdown. Low or no growth is in prospect for the rest of 2012," said Mr MacRae.
It may be scant comfort to ministers in Scotland that the country's private sector recorded a 19th successive increase in output in July and appears to have out-performed that of UK, which slipped into reverse. The composite output index for the UK fell to 49.4 from 51.4 in June, although London and the East Midlands recorded solid growth.
Business confidence levels in the UK plunged in July to the lowest levels recorded this year according to research for BDO accountants.
The results of the PMI studies may lead to renewed calls for ministers to do more to try to stimulate the recovery, following claims that the Coalition's deficit reduction programme is stifling the economy.
The PMI indicates the manufacturing sector is being hit hard by the problems in the eurozone, which are reducing demand in key export markets.
Production fell at the steepest rate in 18 months in July, when the relevant index reading dropped to 46, from 50.6 in June.
Bank of Scotland highlighted a "marked and decelerated decrease" in new business from foreign clients, noting: "The eurozone was highlighed as a key area of weakness."
The bad news about manufacturing was offset by further indications that the fortunes of firms in the key financial services sector are improving, in spite of the latest problems faced by banks.
Financial services firms recorded the strongest increase in activity levels for 15 months in July, helped by what Bank of Scotland called a "notable rise in new work". The activity index for the sub-sector increased to 56.3 in July from 53.5. With financial services firms and business services operations like consultancies creating jobs, the services sector powered an overall increase in private sector employment in Scotland.
The composite employment index edged up to 51.5 in Scotland from 51.4 in June. The UK reading increased to 51.4 from 50.7. However, the employment index in the travel, tourism and leisure sub-sector was little changed, at 50.1 compared with 49.5 in June.
With the activity index reading for travel, tourism and leisure falling to 50.6 in July from 51.8 in June, the PMI findings suggest sector players are being hampered by difficult condition in key markets. There was no sign of a pre-London 2012 Olympics boost to visitor numbers in Scotland.
Travel, tourism and leisure firms reported steep increases in the cost of key inputs like food and transport.
The rate of job creation slowed to marginal levels in manufacturing in July, when the sector employment index fell to 50.3 from 52.1.
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