The survey, which covers manufacturing and services, found a fresh fall in output across Scotland’s private sector in September, as the ongoing weakness in manufacturing production extended to services activity — which fell for the first time in eight months.

The headline Scotland Business Activity Index fell to 49.3 last month, which is below the 50.0 no-change threshold separating growth from contraction. However, the 0.7 decrease signals only a marginal reduction in business activity.

Respondent firms noted that uncertainty regarding the economic outlook — in addition to increased borrowing costs and inflationary pressures — had squeezed incomes, driving down customer activity.

Average prices charged for the provision of private sector goods and services rose during September, following August’s recent low. On this, respondents noted that higher cost burdens fed through to greater output charges.

Input prices also rose in September, with surveyed businesses blaming growing cost burdens on wage inflation and material cost increases. Though marked and strong in context of the historical data, the rate of input price inflation moderated to a 31-month low, with both sectors reporting easing cost pressures.

In terms of overall business confidence at Scottish private sector companies, sentiment increased to a three-month high, with firms expecting activity growth stemming from improved demand conditions, the launch of new products, and general market growth. That said, fears of increased competition and inflationary pressures resulting in fewer sales meant confidence levels have remained historically muted.

Regarding employment, an eighth monthly expansion in recruitment was recorded. However, underlying data showed that job creation was limited to the service sector and was marginal overall.

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Speaking on the latest data, Judith Cruickshank, chair of the Scotland board at RBS, commented: “The third quarter ended with a fresh contraction in business activity across Scotland’s private sector, thereby marking the first fall in output since the start of the year.

“The downturn in activity was unsurprising as indicated by falling demand for Scottish goods and services for the third successive month in September. This, coupled with historically muted expectations for the outlook for output, signals a weak fourth quarter.

“Whether the downturn will gain momentum or if demand trends can be reversed will be something to watch for in the coming months.

“In some positive news, cost burdens rose at the weakest pace in over two-and-a-half years. Cooler price pressures should eventually lead to renewed demand.”