Scotland's economy is struggling to grow but is staving off recession for now, according to a report.

The latest Bank of Scotland Purchasing Managers' Index found that the economy grew slightly faster in January than in the previous month.

However, the employment rate was weaker than the UK as a whole.

Donald MacRae, chief economist at Bank of Scotland, said: "The January PMI edged upwards, suggesting the private sector of the Scottish economy continues to show modest growth.

"The first increase in new orders at manufacturers for five months was particularly encouraging. New export orders weakened but at the lowest rate for four months, while the service sector grew for the 13th month in a row.

"The Scottish economy is struggling to maintain growth momentum in the face of a global slowdown but is, so far, avoiding a return to recession."

Bank of Scotland said the drop in input-price inflation, which counts the cost of raw materials, components and fuel, is encouraging news for businesses. However, the continuing rising cost of food, fuel and utilities meant the service sector faced higher input inflation.

The report shows a slightly quicker increase in output at Scottish firms.

Growth was underpinned by a rise in service sector activity, as goods production fell marginally on the month.

Incoming new business increased solidly for the second month in succession and at a slightly faster rate, as manufacturers received more new work for the first time in five months, according to the index.

Service providers nevertheless registered a stronger increase in business wins, with anecdotal evidence suggesting they had benefited from favourable weather.

In line with the trends in both output and new business in January, employment within Scotland's private sector increased at a slightly quicker pace.

Job creation remained only modest however, with a faster rise in staff numbers in the service sector negated by weaker recruitment by manufacturing companies.

Outstanding business fell only slightly in January, as a build-up of backlogs in the service sector - the first for five months - partly offset a marked fall in "work-in-hand" at manufacturers.

Scottish Finance Secretary John Swinney said: "There are some encouraging signs in this month's survey including the first increase in new manufacturing orders for five months. However, there is a need for further sustained activity to support Scotland's economic recovery in the face of severe cuts from Westminster.”