Growth 'subdued' say surveys
More ‘softening’ evident in Scottish economy
Surveys today provide further evidence of a softening of the Scottish economy.
A Bank of Scotland report pointed to “a further slight increase in Scottish private sector output”, and said June’s data “extended the current sequence of expansion to seven months”, the longest recorded for almost two-and-a-half years.
But the rate of growth appears to be slowing and a second survey from BDO went further by suggesting output is now “at the point of contraction” after slumping to a four-year low.
BDO said this underlines the possibility of a weak second quarter following a positive first three months for the Scottish economy.
There was some disparity on the strength of the services sector. The Bank of Scotland PMI survey said activity growth in the service sector “remained unchanged since May” while BDO said the poor performance of the services sector, continues to stunt economic growth.
Both surveys agreed that the manufacturing sector has is growing but at a slower rate and below the long-term trend.
Fraser Sime, regional director, Bank of Scotland commercial banking, said: “Scotland’s private sector output growth reduced slightly at the end of the second quarter.
“Manufacturing, which was previously a key driver behind private sector growth, softened in June. The services sector remained subdued overall and with an unchanged rate of expansion since May.
“However, there was also some positive news. Employment returned to growth and input price inflation further decreased in the latest survey. In addition,
“Business confidence fell in June, although to a lesser extent than seen across the UK as a whole.”
Martin Gill, partner and head of BDO in Scotland, said: “Since the financial crisis, the economic recovery has been reliant on consumer spending and a growing services sector. For the past two years now we have witnessed both a decrease in the performance of the services sector, as well as a reduction in consumer spending, which has become more pronounced after the devaluation of sterling.
“To deal with the pressures of rising inflation and to accelerate economic growth, monetary policy makers are seriously considering raising interest rates. However, given the economy’s clear weakness and the continuing uncertainty we are going to see from Brexit, to raise interest rates at the moment would be a major mistake.”
Scottish Economy Secretary Keith Brown saw an upbeat message in the data. He said: “The latest Bank of Scotland PMI figures signal expansion in Scotland’s private sector in every month, for the first half of this year.
“The survey also signals that companies across Scotland have seen increased employment numbers alongside new business and order growth. Business sentiment remains positive with future output expectations on the rise.
“It is a further vote of confidence in the Scottish economy, coming on the back of GDP figures that show growth four times that of the UK figure over the first three months of the year, with unemployment also at a record low of 4%.
“While this is encouraging, Brexit uncertainty continues to cast a shadow over the future economic outlook, threatening jobs, investment and living standards. The Scottish Government will continue to use all of the powers at our disposal to grow the Scottish economy.”