Two dramatically conflicting snapshots of Scotland's economy are published today, with one showing the nation's manufacturing and service sectors performing at their best since the turn of the century, yet the other claiming Scotland is now bottom of the top 10 small, developed countries.

Royal Bank of Scotland's PMI Scotland Report for May shows the sharpest growth of private sector output since April 2000, with both manufacturing production and service sector activity rising at sharper rates than in the previous month.

However, according to the Federation of Small Business Scotland's index of success 2007, "when compared to the smaller nations of the OECD, Scotland has failed to maintain the progress it recorded in the 2006 index and languishes once again at the bottom of the league table".

However, the PMI (Purchasing Managers' Index) Scotland report, which is produced for The Royal Bank of Scotland by NTC Economics, noted that growth of new order levels accelerated in both the manufacturing and service sectors in May, registering 37- and 92-month highs respectively.

The report, which is based on original survey data collected from a panel of more than 600 companies based in Scotland, said more businesses were reporting higher demand from existing customers and contract wins from new clients - aided by increased marketing expenditure.

Manufacturers recorded a rise in new export orders for the first time in nine months, while service sector business activity increased at its fastest pace since March 1998.

David Fenton, Royal Bank senior economist, said: "Scotland shot up the UK economic league table in May, with rapid growth inactivity catapulting it into the top half for the first time in over a year. Business and financial services were the stand-out sectors, though conditions remained robust in manufacturing."

Growth of Scottish manufacturing production improved marginally in May to its strongest pace of 2007 so far. The seasonally-adjusted output index pointed to a robust rate of growth, standing at 54.6 index points, from 54.4 in April. Increased production was often linked to higher volumes of incoming new business and improvements in efficiency.

Climbing from 53.0 in April to 54.7 in May, the seasonally-adjusted new order books index pointed to the sharpest rise in volumes of new business placed with Scottish manufacturers in over three years. Panellists reported acquisitions of contracts from new clients and higher demand from existing customers. Some also noted an increase in new export orders.

New orders received by Scottish manufacturers from abroad rose for the first time in nine months during May. Panellists reported contract wins in China, the Middle East and the US. But, at 50.5, from 47.6 in the previous month, the seasonally-adjusted export orders index delivered only a marginal rate of growth.

However, the improvement in Scottish private sector output growth shown in May was largely driven by the service sector.

Climbing from 56.7 in April to 59.1 in May, the seasonally adjusted business activity index pointed to the sharpest rise in Scottish service sector activity since March 1998. More than a third of panellists reported that activity levels were higher than in the previous month, with many linking the increase to gains in new business.

Increased numbers of enquiries, launches of new projects and company expansion programmes were also listed as factors underpinning the latest rise in service sector activity.

Rates of activity growth in business and financial services accelerated markedly in May, reaching eight and 15-month highs respectively. Activity in the travel, tourism and leisure sector also rose at a sharper rate.

Growth of incoming new business in the Scottish service sector accelerated markedly in May to reach its sharpest pace since September 1999, rising from 55.5 in April to 57.9.

Though strong, the latest increase in activity was unable to prevent a further build-up of unfinished work in the Scottish private sector, with the rate of growth the sharpest since backlogs data were first collected in January 2000.

The build-up of work-in-hand was driven by a marked rise in new order levels - the strongest in over three years, said the report.

Also, job creation was weaker than in April, with some firms experiencing difficulties appointing suitable staff. Although employment continued to rise - for the 27th successive month - the rate of job creation was the weakest since last October.

Fenton added: "The report suggested Scotland's economy may experience growing pains later on, with a marked build-up of backlogs and reported difficulties in recruiting staff indicative of reduced spare capacity. Without further investment, this could limit the rate of expansion in the longer term and accentuate inflationary pressures. Even so, that shouldn't take the sheen off an emphatically upbeat survey."

Dear, green place at bottom of the pile