GROWTH of the Scottish private sector economy accelerated last month to its fastest pace since July, a survey has revealed.

Bank of Scotland’s latest PMI (Purchasing Managers’ Index) report also shows a pick-up in the pace of employment growth in the private sector economy north of the Border.

However, optimism among Scottish companies about growth prospects over the next 12 months eased in October to its joint-weakest since April.

Bank of Scotland’s PMI, which measures the month-on-month change in combined manufacturing and services output north of the Border, rose from 52.2 in September to 52.7 last month on a seasonally-adjusted basis. This signals a slightly faster pace of expansion, with 50 deemed to be the level that separates growth from contraction.

However, growth in Scotland’s private sector economy in October remained weaker than that in the UK as a whole.

The UK PMI rose from 54.1 in September to 55.8 last month.

The latest Scottish survey also signals continuing inflationary pressures for Scottish companies, against the backdrop of sterling’s post-Brexit vote weakness. The pound’s fall has fuelled inflation by making imported goods more expensive.

Bank of Scotland highlighted upward pressure on raw material and staff costs.

The manufacturing sector continued to grow at a faster pace than services north of the Border in October.

The manufacturing output index edged up from 53.3 in September to 53.4 last month.

Services growth in Scotland accelerated last month, with the business activity index for this sector rising from 51.9 in September to 52.6 but continuing to signal a relatively modest pace of expansion.

New business growth for the Scottish private sector economy accelerated in October. And the survey signals the fastest pace of increase of incoming business for the Scottish services sector for 34 months.

In spite of the boost to Scottish companies’ competitiveness in overseas markets from sterling weakness following last year’s Brexit vote, new export orders for the manufacturing sector north of the Border showed a slight fall for a second consecutive month.

And, with incoming business from within the UK also weak, overall new orders for the Scottish manufacturing sector also fell for a second straight month in October.

On a more positive note, an increase in the manufacturing employment index from 52.1 in September to 53.9 last month signalled a significant acceleration in the pace of increase of this sector’s workforce.

Employment growth in the services sector remained weaker than that in manufacturing. The services employment index rose to 51.1 last month, from 50.2 in September.

The survey shows continuing intense cost pressures for Scottish manufacturing. The input prices index for this sector dipped from 66.1 in September to 64.9 last month, but remained way above the no-change mark of 50.

Bank of Scotland said: “Panellists reported that the effects of a weaker sterling continued to impact raw material costs.”

The average costs index for the Scottish services sector was 62.1 in October, down slightly from 64.1 in September, but still signalling a rapid pace of increase.

Bank of Scotland said: “Average cost burdens faced by Scottish service providers rose in the latest survey period. Panellists associated higher input costs with a combination of wage and food price inflation. The rate of inflation was sharp.”

The survey shows factory gate prices continued to rise in October. And services companies increased their prices at a faster rate.

Fraser Sime, a regional director in Bank of Scotland’s commercial banking business, said: “Scottish private sector companies began Q4 positively, with output growth accelerating to a three-month high.

“The upturn was broad-based, with both manufacturing and service output expanding at quicker paces.”

He added: “Input costs continued to remain in sharp inflationary territory amid reports of higher raw material prices and wage bills. Nonetheless, higher labour costs did not deter businesses from taking on more staff.

“The rate of job creation quickened to a modest pace.”