SCOTTISH economic output grew by 0.5% in the third quarter of last year, matching expansion UK-wide, as manufactured exports rose 0.2%, official data have revealed.

The figures provide some reassurance about the health of the Scottish economy up to the end of September.

However, downbeat business surveys and rising unemployment are pointing to a likelihood of stagnation or even contraction in the final three months of last year and to a continuing deterioration in conditions.

And, comparing gross domestic product in the year to September 30, 2011, with the preceding 12 months, growth of 0.9% in Scotland trailed expansion of 1.3% UK-wide.

Scotland's economy stagnated between September 2010 and June 2011, with a 0.4% fall in output in the final three months of 2010 offset by growth of 0.2% in each of the following two quarters. The UK was almost stagnant during this period, achieving only marginal growth.

The Scottish services sector grew by 0.9% quarter-on-quarter in the three months to September 30 last year, yesterday's data from the Scottish Government revealed, ahead of a 0.7% advance UK-wide. This was fuelled by a 2.4% increase in output of the real estate and business services sub-sector. And output of Scotland's financial services industry rose by 1.4% in the third quarter.

Comparing the year to September 2011 with the preceding 12 months, services output growth of 0.3% in Scotland was way adrift of a 1.2% UK rise.

Construction output in Scotland fell by 1.2% quarter-on-quarter in the three months to September. However, comparing the year to September with the preceding 12 months, it was up 5.9%. Some economists have expressed considerable surprise about the strength of construction output in the official figures for the preceding quarters.

Scottish production output dropped 0.1% quarter-on-quarter in the three months to September. However, the manufacturing output component grew by 0.9% in Scotland, a significantly greater increase than that UK-wide. It was a 5% fall in electricity, gas and water supply which dragged Scottish production output lower.

Within Scottish manufacturing, the engineering sub-sector turned in a strong performance in the three months to September with a quarter-on-quarter rise in output of 1%. Electrical and instrument engineering, which takes in Scotland's diminished but still sizeable electronics sector, achieved a 1.4% rise in output.

Brian Ashcroft, emeritus professor of economics at Strathclyde University and economics editor of Fraser of Allander's regular commentary, said: "Basically, there is an element of reassurance in the (GDP) data from the third quarter, in the fact it wasn't a catastrophic reduction.

"Output is up about 0.5%, almost identical to the United Kingdom in GVA (gross value-added) terms. That has some degree of encouragement in it. It suggests that, up to the third quarter, the Scottish economy was still recovering, albeit quite slowly."

He noted Scottish GDP in the third quarter was still more than 3% less than its pre-recession peak.

Mr Ashcroft spoke of the danger for Scotland of renewed "technical recession" – at least two consecutive quarters of falling GDP. However, he said Scotland was not facing the same precipitous fall in output it saw from late 2008.

Giving his view of what would have happened to the Scottish economy in the final three months of 2011, and looking ahead, he said: "Unfortunately, what we will see in the fourth quarter is it will be much flatter, and (there is) a strong risk of it even being negative in the fourth quarter.

"The indications in all the business surveys are there has been a further weakening in the economy. We are not in the position we were in 2008, where the economy fell off a cliff in the final quarter - We may have a technical recession.".