OUTPUT among firms is to decrease, according to a report by accountants and business advisers BDO LLP.
Its business trends report showed the output index, which shows how order books are expected to develop over the next three months, has fallen to 94.9 in June from 95.4 in May.
The report said the figure is now dropping below 95, the point of contraction.
The slump leaves output at a new four-year low and underlines the possibility of a weak second quarter following a positive first quarter for the Scottish economy.
The firm’s optimism index, which shows how firms expect their order books to develop in six months, signalled “a much brighter future”.
It increased to 102.9 in June, up from 102.8 in May. The eight-point difference between the optimism and output indices is the largest ever on record.
Experts say this implies Scottish and UK businesses are expecting a flurry of business activity following the political uncertainty in June, which left many businesses delaying investment plans.
BDO’s inflation index dropped from 105 to 104.8 in June but inflation remains a key concern for households, with consumer price inflation currently outpacing wage growth.
Analysts say it is eroding household budgets and having a negative effect on industries such as retail and hospitality.
Martin Gill, partner and head of BDO LLP in Scotland, said: “Since the financial crisis, the economic recovery has been reliant on consumer spending and a growing services sector.
“For the past two years now we have witnessed both a decrease in the performance of the services sector as well as a reduction in consumer spending, which has become more pronounced after the devaluation of sterling.
“To deal with the pressures of rising inflation and to accelerate economic growth, monetary policymakers are seriously considering raising interest rates.
“However, given the economy’s clear weakness and the continuing uncertainty we are going to see from Brexit, to raise interest rates at the moment would be a major mistake.”
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here