Scottish private sector activity saw a modest uptick in August, which means the sector has now seen three months of sustained growth.

According to the Royal Bank of Scotland’s Regional Growth Tracker, Scotland saw a slight increase in output, pushing the region’s growth just past the neutral point in August to 50.3, from 48.7 in July.

August also saw an ease in the downturn on new businesses, with the rate of contraction closing to its smallest in the last 11 months of decline.

The service sector was the greatest contributor to Scotland’s overall increase in output, with the sector reporting new contract wins and an increase in enquiries largely tied to successful marketing.

In manufacturing, however, output contracted, though this rate of declined weakened to its lowest in nearly a year, indicating the production levels are on their way to stabilising.

While companies remained cautious about labour costs, more firms anticipated output growth in the next year in August as business sentiment improves.

“Forward-looking indicators suggested a relative improvement in conditions facing firms, with the downturn in new business easing notably, and companies expressing a more optimistic outlook for future activity,” Judith Cruickshank, chair of the Scotland board at Royal Bank of Scotland, said.

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“However, despite these improvements, companies remained cautious about expanding their workforce numbers. Employment declined for the third consecutive month, with firms partly linking this to rising labour costs.

“Although cost pressures remained sharp, they showed signs of easing compared to July. At the same time, greater confidence around the outlook and demand led firms to raise their charges at a stronger pace.”

While businesses in Scotland were more optimistic about activity growth in August, this was subdued and weaker than the UK-average level of business optimism.

Scotland also saw a modest decrease in employment levels in the private sector, with anecdotal evidence pointing to redundancies and many firms deciding to not replace those that voluntarily left their jobs, citing labour costs.

Scotland had some of the weakest rates of cost inflation in the 12 UK nations and regions during August as well.