Economic Commentary - October 2021

The Economic Commentary provides a monthly update on global, UK and Scottish economic trends, drawing on recent economic data as well as feedback from businesses.

The methodology consisted of desk research.

Global business activity continued to grow in September driven by the rollout of vaccines, policy support and the lifting of restrictions. Europe has outperformed other economies. However, overall global activity has slowed over the month, suppressed mainly by supply chain issues. The latest monthly GDP data for both the UK and Scotland have been positive, but growth has been lower than expected. The Scottish labour market has continued to strengthen, with higher employment and lower economically inactive over the summer. However, staff shortages are being reported across almost all sectors. Staff retention and recruitment has been highlighted by businesses as one of the biggest challenges over the next 6 months. Some are responding by offering increased salaries and other incentives. Shortages of some goods, a knock on effect of both Brexit (for the UK) and COVID (globally), have pushed prices up and disrupted some supply chains. This has been exacerbated by labour shortages in the transport and logistics sector. The latest forecast for the Scottish economy is for robust growth in 2021 as COVID restrictions ease, and a return to pre-pandemic levels of output by April 2022.

Possible headwinds facing Scottish businesses in the near term include ongoing rising input costs, supply chain disruptions, competition for staff as vacancy rates hit an all-time high, and possible redundancies following the end of the furlough scheme.