Food manufacturing was a key sector for growth

Scottish Executive figures on Gross Domestic Product (GDP) showed that manufacturing output rose by 0.8% in the first quarter of 2004.

However, over the year to the end of March, manufacturing declined by 1.5%.

Mr Wallace said he was pleased Scottish manufacturers appeared to be recovering from a difficult trading period.

Financial year

A key driver of the quarterly manufacturing increase was engineering which showed a 1% rise in output.

The food, drink and tobacco manufacturing industry grew 1.4%.

GDP across all sectors of the economy grew 0.2% in the first quarter of 2004.

Scotland's total GDP rose by 1.6% over the financial year 2003/04, boosted mainly by a 2% growth in the service sector, as well as an 8% rise in construction business.

GDP across the UK, which officials say is not strictly comparable to the Scottish figure due to different statistical methods, rose by 2.3% over the same 12-month period.

It rose 0.6% over the first quarter of 2004.

It is our lower growth that causes our lower average incomes, poorer health, lower life expectancy and population decline. It is little wonder we're not happy. Jim Mather Scottish National Party

Mr Wallace said: "I am pleased that the GDP figures for the first quarter of the year show that the economy continues to grow.

"The service sector continues to be the main driver of growth, with an increase of 2% over the year.

"The performance of the manufacturing sector still indicates that over the year the sector was suffering from difficult trading conditions during a sustained period of global restructuring.

"However, we're particularly encouraged that the latest data indicates that the sector may be returning to growth, with a 0.8% increase in the first quarter."

Scottish National Party enterprise spokesman Jim Mather said the rest of the UK was growing faster than Scotland.

He said: "This economic under-performance is the key reason why people in Scotland are less satisfied with their lot than their neighbours, friends and relations in the south.

Global downturn

"It is our lower growth that causes our lower average incomes, poorer health, lower life expectancy and population decline. It is little wonder we're not happy."

Scottish Tory enterprise spokesman Murdo Fraser welcomed "any signs of a recovery", but accused Mr Wallace of complacency.

He said: "He once again blames any problems on the global downturn and abdicates any responsibility himself.

"If the global downturn is the cause of all our problems, why is the rest of the UK growing so much more quickly?