NEW figures released by the Bank of Scotland show that Scotland’s private sector output increased during September for the first time in three months.

The monthly Bank of Scotland Purchasing Managers’ Index (PMI) rose to a 14-month high of 51.2 over the month, up from 49.1 in August.

The latest figure brings to an end a two-month period of contraction, as manufacturers and service providers both reported increased business activity.

The rate of expansion was the fastest for 14 months, as firms also recorded higher levels of new business and employment.

Volumes of new business in the private sector rose for the first time since June, with total new work in the service sector rising, ending a two-month sequence of decline.

The rate at which new business expanded was the sharpest for eight months. Manufacturers received higher new order volumes, ending a two-month period of contraction, though the rise was fairly marginal.

Jobs growth continued, though at a slower pace than in August.

The rate of jobs growth in the goods-producing sector, however, quickened to a 22-month high.

A number of panellists linked the rise in employment figures to efforts to support the expansion in output.

On the price front, firms raised their selling prices, as they faced the fastest increase in input costs for 33 months. The increase in input costs continued a long-running trend for service-sector firms, while input costs faced by Scotland’s manufacturing companies increased for the fifth month in succession. There was some evidence of a link between the increase and the pound’s unfavourable exchange rate movements.

Selling prices were increased by service providers for the second consecutive month. The rate of inflation was the sharpest in 24 months and slightly stronger than the long-run historical average. Scottish goods producers increased their output prices in September, lengthening the current sequence of inflation to three consecutive months. According to survey evidence, the depreciation of the pound was again linked with firms increasing their average charges.

The Index is based on data compiled from replies to questionnaires sent to purchasing executives in around 600 private manufacturing and service sector companies.

Nick Laird, regional managing director, Bank of Scotland Commercial Banking said: “An upturn in Scotland’s private sector was signalled in September, as the headline index rose to a 14-month high. The improvement in the economy was equally shared between service providers and manufacturers, who both registered modest increases in output during the month.

“Demand for Scottish goods and services also rose, highlighted by a rise in new business. On another note, firms faced the fastest increase in input costs for 33 months, putting pressures on firms’ margins as we approach the end of the year.”

UK Government minister Andrew Dunlop said: “This is good news for Scotland. Behind the numbers, this means new jobs and opportunities for hardworking families across Scotland.

“These numbers show there are real opportunities for Scotland’s economy that must not be wasted, and the UK Government is ready to work with them to unlock those opportunities – that’s what people in Scotland expect of us.”