Signs of Scotland's economic recovery 'muted'

The survey suggested an unexpected increase in manufacturing exports in the first quarter

Weak domestic and consumer demand lies behind "continued fragility" in the Scottish economy, according to a quarterly business survey.

The Scottish Chambers of Commerce (SCC) found signs of an encouraging start to the year in manufacturing, construction and - to a lesser extent - tourism.

But it warned low demand remained a "major constraint" to increased activity in most sectors.

The survey covered the first three months of 2013.

It was conducted in tandem with the University of Strathclyde's Fraser of Allander Institute.

The report indicated an unexpected rise in manufacturing exports, while construction firms reported an increase in private commercial work.

Wholesale and retail distribution firms, on the other hand, experienced steeper declines in business than expected by companies in the previous survey.

In terms of confidence, optimism among manufacturing firms rose further, while construction businesses were not as downbeat as the previous quarter.

There was also an unexpected modest rise in tourism confidence.

'Stimulate demand'

SCC said the survey suggested clear signs of an economy which was "continuing to bump along a path of little or no growth".

SCC head of policy Garry Clark said there were "some positives" to take out of the first quarter's figures, but the "muted signs" of improvement in the economy required confidence from businesses and consumers to spend and invest.

He continued: "The majority of businesses across all sectors, except in oil and gas, identify the lack of demand as the key blockage to future growth and if Scotland is to return to trend levels of growth of 1%-1.5% per year or more, then further efforts will be required by government at all levels to stimulate demand.

"The Scottish government and, more recently, the UK government have now recognised the value of focusing resources on capital spending and investment.

"This must be accelerated and government must also look at how it can reduce the cost base for business, including action to reduce the impact of business rates."