Private sector business output in Scotland grew for the third consecutive month in March with growth driven by the service sector, according to a new report.
The Royal Bank of Scotland (RBS) Scotland Business Activity Index rose from 52.1 in February to 53.6 in March, indicating the most pronounced expansion in 11 months.
The latest upturn across Scotland surpassed that seen for the UK as a whole, with only London and Northern Ireland recording stronger rates of growth, the report said.
However underlying data noted a “continued divergence” between the manufacturing and service sectors in Scotland.
While business activity rose across service providers at the sharpest pace since June 2022, the downturn in manufacturing production entered its ninth successive month and had deepened since February.
Judith Cruickshank, chairwoman of the Scotland Board at RBS, said: “The health of the Scottish private sector continued to improve as the first quarter drew to a close.
“However, the growth recorded was solely garnered on the back of the fast-expanding service sector.
“Meanwhile, the production segment of the economy remained a challenge.
“The lopsided nature of the expansion injects some concern over future growth.
“Divergent trends were also seen in terms of employment, which increased in services but decreased solidly across manufacturing.”
The report noted that Scotland’s private sector signalled a second consecutive monthly rise in new business during March.
This was driven by service firms while the downturn in new manufacturing orders entered its twelfth successive month.
Latest data indicated a further improvement in confidence levels at Scottish private sector companies which rose for the second straight month to a 13-month high.
Meanwhile the seasonally adjusted Employment Index was above the 50.0 neutral mark for the 14th month running in March, pointing to a rise in employment at Scottish firms.
Outstanding work across Scotland’s private sector fell in March, with a drop now recorded in 21 of the last 22 survey periods, according to the report.