As I See It
A confusing tale of economic forecasts
Someone said that economists have accurately predicted nine of the last five recessions. Yes, they are an unfathomable lot.
It’s therefore difficult on occasions not to feel sorry for the Chancellor. It must be hard enough trying to listen to the many voices offering advice on how to manage the economy. Worse still when the ‘evidence’ is contradictory.
While there is a consensus in figures from the CBI, Bank of Scotland and others on the overall direction of travel – slower growth, but resilience in the face of global headwinds – the detail points to differing interpretations about what is driving growth and what is holding it back.
The latest monthly survey on the Scottish economy from Bank of Scotland, published today, says “growth was mainly driven by the service sector” and “rising employment was driven by service providers, who linked increases in head counts to stronger demand.”
It adds: “Growth of new business in the service sector was partly offset by a decline at manufacturers.”
Yet only last week the Fraser of Allander Institute/PWC quarterly survey published data showing that the service sector in Scotland had slipped while construction was boosting the economy.
Paul Brewer, PwC’s government and public sector leader in Scotland, said: “There is a risk we will become increasingly exposed to shortfalls in the service sector.”
Its survey shows the trends in Scotland running counter to the wider UK outlook. Services north of the border are struggling while construction is buoyant on the back of public infrastructure. The UK wide trends are the other way around.
The Fraser of Allander view is echoed in today’s Business Trends Report from accountants and business advisers BDO which indicates that businesses expect their order books to continue to grow strongly.
“However, this is driven by the buoyant services sector, masking serious concerns among manufacturers”, it says, adding: “the UK becomes even more reliant on the service sector for growth.”
Over to you, Mr Osborne.