Better manufacturing figures could signal a period of modest growth

A report by Strathclyde University's Fraser of Allender Institute said the housing market continued to be buoyant but the service sector was suffering.

It predicted that manufacturing would trigger a period of modest economic growth.

The institute also said Scotland could see further falls in unemployment next year.

The boost in manufacturing is expected because of strong performances in transport equipment, chemicals, engineering and metals, the study said.

However, the Scottish service sector is performing less strongly than that of the UK as a whole, despite some improvement on growth between 2003 and 2004.

While the latest quarterly figures still indicate weaker growth in Scotland than in the UK, the annual figure for Scotland in 2005 is 1.8%, compared with 2.1% for the UK.

Analysts growth of 1.8% in 2006 and 2% in 2007.

The institute said UK growth would pick up again in 2006 and forecast further falls in unemployment with net job creation of about 20,000 each year.