Scottish businesses have seen manufacturing orders drop over the last three months, according to a survey by CBI Scotland.
The industrial trends survey found domestic and foreign orders had slipped following a recovery up to July.
However, output rose modestly over the last three months, albeit at a slower pace than in July.
Firms expect new orders and export orders to increase in the next quarter as the pound continues to trade at near-historic lows. Optimism for new export prospects in the year ahead also edged higher, posting the first rise since April 2015.
Investment intentions for the year remain muted but are generally above their historic averages.
Planns for investment in buildings are at their strongest since July 2014.
CBI Scotland Director Hugh Aitken said: “It had been hoped that Scottish manufacturers would see a continuation of the recovery seen in the second quarter of this year, but our latest survey shows order volumes and employment slipping over the last three months.
“Amid sluggish GDP growth relative to the rest of the UK, this is a reminder of the very significant challenges facing businesses in Scotland as they contend with economic and political uncertainty. It underlines again the need for the Scottish and UK Governments to work together and secure the best deal possible in the EU negotiations.
“It’s also more important than ever for the Scottish Government to make decisions in the upcoming Budget that make businesses as competitive as possible. We welcomed measures announced at SNP conference to support Scottish exports and our survey suggests the silver lining for many businesses is the prospect of selling more goods overseas, taking advantage of recent falls in the pound.”