The Scottish economy grew by just 0.3% in the first quarter of 2008, providing the first evidence that the shock waves of the global credit crunch are to rippling through to the rest of the economy.

While the latest gross domestic product data from the Scottish Government revealed that the annual rate of economic expansion in Scotland came in at 2.1% - a tick down from the above-trend growth of 2.2% for the 2007 calendar year - this new figure masked the devastating impact of the global downturn on the financial sector.

The UK figures show that national GDP had climbed by 2.8% in the year to the end of March, and - as in Scotland - by 0.3% in the first quarter of 2008, hampered by the credit crunch, the tepid global economic climate, rising inflation and the rocketing price of oil.

Following strong growth in the last quarter of 2007, the Scottish financial services industry fell sharply by 8.4% in the latest quarter, marking the largest three-month decline ever seen in the industry.

The service sector as a whole grew by 3.2% in the year to the end of March, but the banking industry - which has been hardest hit by the global credit crunch - contributed most to the overall slump in financial services, shrinking by a staggering 10.9%.

The banking sector had been a key contributor to Scottish growth at the end of last year, with expansion of 9.3% in the fourth quarter alone.

There was further bad news regarding the decline in public service outputs, and in the last 12 months public administration and defence declined by 3.6% and education by 0.5% in Scotland - both well below the UK rates.

Only health services in Scotland have outperformed the UK, with 3.6% annual growth, compared with 2.4% growth in the UK.

Nonetheless, the latest government figures also revealed that between January and March this year the production sector shrank by around 0.5% and construction fell by 2.9% - as the credit crunch began to bite into housebuilding and factory output, as well as other areas previously unaffected by the downturn.

In the months that have elapsed since the end of the year's first quarter, the beleaguered housebuilding sector has seen company share prices collapse and thousands of jobs axed.

Earlier this week, in the latest piece of grim news from the sector, Stewart Milne Group, the Aberdeen-based housebuilding firm, announced it would slash its workforce by 20% after the economic downturn and credit crunch instigated a slump in sales.

However, there were bright spot in the latest figures. Within the services sector, real estate and business services expanded 2.4% and hotels and catering rose 2.6%, all experiencing strong growth over the quarter.

So-called "other services", which include leisure, climbed 3% during the first three months of 2008.

Figures provided by Xscape Braehead yesterday also provided a chink of light amid the gloom. The entertainment complex yesterday said that the five millionth visitor stepped through the doors of Xscape this month.

Xscape added that the figure means that the equivalent of the entire population of Scotland has visited the £70m entertainment destination since its opening in March 2006.

Nonetheless, according to an analysis by the Centre for Public Policy for Regions, a joint venture between the Universities of Glasgow and Strathclyde, while the hotels and catering sector has experienced healthy expansion during the quarter, its performance over the past 10 years has been lacklustre at best, with overall growth of just 2.6%.

Mixed messages were being drawn from these latest government figures.

John Swinney, the Scottish Government's finance secretary, said: "Growth in the Scottish economy has matched or surpassed that of the UK in each of the past three quarters - the first time that has happened for many years.

"These figures provide further evidence of continuing resilience in the Scottish economy."

At the same time, however, the latest government figures yesterday were released amid concern that confidence in the manufacturing sector has fallen to a 28-year low.

The findings yesterday from Confederation of British Industry in Scotland came in the wake of a recent report by the Scottish Chambers of Commerce, which said firms were suffering a lack of confidence as they cope with a "general slowdown" of the economy.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: "There remain concerns over business confidence, as highlighted in Scottish Chambers of Commerce's quarterly business survey last week, but we hope that these latest official figures detailing the performance of our economy will provide a boost to businesses.

"This is a clear demonstration that the Scottish economy remains in good shape to weather the turbulence ahead."

The quarterly industrial trends survey from CBI Scotland yesterday painted a particularly gloomy economic picture, predicting that the next three months would see jobs shed at a faster rate, domestic prices rise sharply, and factory output plunge further.

In the past three months, average unit costs rose at their fastest rate since 1980, leading firms to raise the price of goods to restore their profit margins. Domestic prices have risen rapidly over the past two quarters, while export prices have risen at their fastest rate since October 2004.

However, it was the attitude of the manufacturers surveyed to the coming three months that provided the most negative results.

Business leaders forecast a "marked pick-up in job losses, with expectations the weakest since October 2003".

Iain McMillan, CBI Scotland's director, described the latest results as "very disappointing".

He added: "Until now, our industrial trends surveys have shown Scotland's manufacturing sector to have performed well over the past few years.

"This latest set of results, however, is very disappointing - but perhaps not so surprising in the current economic climate.

"These latest results reveal that rising costs and declining demand are causing business confidence in the sector to sharply deteriorate. Hopefully, these tough conditions will prove to be short-lived."