Scotland's economic growth continues to outstrip its longer-term trend rate significantly, a key survey shows today, with immigration cited among the positive forces.

Scotland's economic growth continues to outstrip its longer-term trend rate significantly, a key survey shows today, with immigration cited among the positive forces.

Lloyds TSB's latest quarterly Scottish business monitor shows firms are the second-most optimistic they have been in the nine-year history of the survey about increasing their turnover during the coming six months.

Forty-nine per cent of companies are predicting a rise in turnover during the six months to August 31, with only 10% seeing a drop, and 41% forecasting a level position.

The balance of 39% expecting a rise has only been exceeded in one previous quarter, in the business monitor published at the same stage of 2004.

Professor Donald MacRae, chief economist of Lloyds TSB Scotland, has edged up his prediction of Scottish growth this year from 2.25% to 2.3%.

He puts the annual trend rate of growth since the business monitor was launched at about 1.9%, so his forecast for this year is significantly ahead of this.

Growth of 2.3% would also be well ahead of the expansion of 2% or a touch higher which MacRae has forecast for 2006. Official growth numbers for last year are due from the Scottish Executive in April.

MacRae highlighted strong performances by the retail sector and the housing market in Scotland, and low unemployment, as factors which underpinned hopes of continued above-trend growth in Scotland.

The size of Scotland's workforce has been boosted significantly in recent times by economic migrants from the eastern European countries, including Poland, which joined the European Union in 2004.

Asked if he believed immigration was helping Scotland's growth rate, MacRae replied: "I think it probably is. As well as survey evidence, I have real evidence, real in the sense that lots of the bank's customers, companies, are employing Eastern Europeans, or new Scots if you like, a lot of them from Eastern Europe.

"Obviously, they wouldn't be doing that if they weren't there. They (immigrants) are closing gaps that are clearly there. That is coming through in the GDP (gross domestic product) figures - also in the (company) turnover figures. Lots of evidence to show that is the case."

He added: "I think what is even more powerful is, at the same time that is happening, as you have got record numbers of immigrants, you have still got unemployment near its 30-year low, and employment at its highest ever."

Forty-seven per cent of companies reported in the latest business monitor that their turnover had increased in the three months to February, with 34% reporting a level position and only 19% down.

The balance of 28% reporting a rise was down slightly from the 34% recorded for the prior three months - but this had been the second-highest number in the history of the monitor. The 28% was also much greater than the 11% balance recorded for the same period of 2006, and well above the long-term average.

MacRae said: "The implication is that the above-trend rate of growth identified in Scotland's economy during the autumn has been sustained throughout (the) winter."

Scotland's production sector, which comprises manufacturing, mining and quarrying, oil and gas extraction, and electricity, gas and water supply, punched above its weight in the three months to February.

A balance of 36% of production businesses reported a rise in turnover during the three months, compared with a net 24% of service companies.

MacRae said: "Output in the production sector, of which manufacturing makes up the majority, fell by 0.5% in the third quarter in 2006 according to Scottish Executive data. These latest business monitor results indicate a turnaround in production and manufacturing, and point to an increase in output in the final quarter of last year."

Looking forward, MacRae sees plenty of reasons for optimism. He said: "Scottish consumer confidence remains high with robust levels of annual increase in retail sales while the Scottish housing market continues to show (percentage) annual price increases in double figures. The Scottish economy continues to grow above its trend rate whilst expectations for future growth have risen to their second-highest level in nine years.

"Despite recent increases, both the rates of interest and inflation remain at historically low levels. Consumer confidence remains high, reinforced by record levels of employment. The Scottish economy should grow at around 2.3% in 2007."