Better economic outlook for 2008

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Higher interest rates are expected to lead to subdued economic growth in Scotland for the rest of the year.

However, a Bank of Scotland report said it would pick up in 2008, rising above the long-term average in the first quarter and possibly strengthening.

Tim Crawford, group economist at Bank of Scotland, said indicators suggested the outlook was better for 2008.

"There is the potential for above average Scottish economic growth in 2008", he said.

Mr Crawford said this was likely due to an upbeat business sector, rising employment in Scotland and strengthening Scottish consumer confidence.

Permanent staff

"While recent interest rate rises and unsettled financial market conditions point to subdued economic growth in Scotland in the second half of 2007, the outlook for next year is better," he added.

The Index of Leading Economic Indicators showed that so far in 2007 optimism among Scottish businesses was reflected in strong demand for permanent staff in July.

It also suggested that consumer confidence was higher than the corresponding period of last year in July, despite easing from May's near two-year high.

Firm consumer confidence was reflected in a further annual increase in new car registrations in July.

Registrations rose 9.9% year-on-year in July - the sharpest rate of growth since March 2004.