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New doubt over interest rate cut

Bank says ‘no slowdown’ while Scotland struggles

David MundellThere is no sign of any slowdown in the UK economy as a result of the Brexit vote, which may persuade the Bank of England to hold back on cutting interest rates.

Analysts are still expecting new measures next month to bolster confidence. But the underlying strength of the economy has prompted some hesitancy in the Bank which was widely expected to cut rates this month.

A north south divide may also be emerging. A survey by the bank reveals that firms across the UK are committed to investment and hiring while official data shows no growth in Scotland’s economy.

The Bank of England found there was “no clear evidence of a sharp general slowing in activity” since the EU referendum.

This was greeted by Chancellor Philip Hammond as a sign that the fundamentals of Britain’s economy remain strong.

Most analysts expect a cut in interest rates and up to £250 billion pumped into the economy via quantitative easing to improve lending facilities, though Kristin Forbes, a member of the Bank’s rate-setting Monetary Policy Committee, suggested in a newspaper article taht there was no rush to cut rates.

Her comments have raised the possibility of a split as the MPC’s nine members decide on whether to act next month. Last week they voted 8-1 to keep the rate unchanged.

Ms Forbes says in the article that the Bank had stimulus tools available but added: “In my view, we can wait to use these tools until we better understand the effects of the referendum.”

Unemployment in Scotland fell by 18,000 between March and May to 152,000 but GDP growth was stagnant at 0% over the three months ahead of the EU vote, meaning it still risks falling into recession.

The Scottish unemployment rate is 5.5% compared to 4.9% for the whole of the UK.

The labour market statistics also show employment in Scotland increased by 17,000 over the period. The number in employment in Scotland is 2,625,000.

Commenting on the unemployment figures, Scottish Secretary David Mundell, said: “It means more people in Scotland enjoying the security of a regular wage. But with Scotland’s economy showing little growth over the past year, and the country’s unemployment rate still higher than the UK overall, there is no room for complacency.”

Headline statistics for the quarter:

Employment in Scotland increased by 17,000 over the quarter, and by 2,000 over the year, to reach 2,625,000.

The Scots employment rate increased over the quarter at 74%. The rate is below the UK average of 74.4%.

Unemployment in Scotland fell by 18,000 over the quarter and is up 1,000 over the year.  This now stands at 152,000.

At 5.5%, the Scottish unemployment rate is above the UK’s rate of 4.9%.

Economic activity fell by 1,000 over the quarter and now stands at 2,778,000. Also, the economic activity rate decreased over the year to stand at 78.4%.

In June the number of people out of work and claiming Jobseeker’s Allowance was 56,600 and claimant count, including Universal Credit was 74,700.

Jobseeker’s Allowance and Universal Credit

The number of people claiming Job Seeker’s Allowance (JSA), decreased by 500 from May to 56,600 in June 2016.  The level is down by 18,000 on June 2015.  The claimant count level (JSA and Universal Credit) is up 200 over the month at 74,700 and the rate is unchanged over the month at 2.7%, which is down 0.1 percentage points over the year.

Economic Activity

The number of economically active (defined as those in employment or ILO unemployed, and seasonally adjusted) in Scotland in the March to May 2016 quarter was 2,778,000.  This was down 1,000 on the previous quarter, and up by 3,000 on prior year levels.  Among those aged 16-64 the economic activity rate was 78.4%, down 0.3 percentage points on the previous quarter, and down 0.4 percentage points over the year.


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