Economic Commentary – June 2022

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.

All major global economies reported weak growth or even contraction in the first quarter of 2022 as high inflation, the conflict in Ukraine, and supply chain challenges related to the pandemic all weighed on economic performance. Growth in UK GDP slowed to just 0.8% in the first quarter and contracted by 0.3% in April as consumers cut back on spending. Business surveys also suggest a loss of momentum in April, with rising inflation beginning to weigh on demand. The Scottish economy grew by 1% over the first quarter of 2022 and by 0.3% in March. Business activity has been more resilient than in the UK (likely due to a later easing of restrictions), but confidence is now easing as concerns over inflation grow. Unemployment in Scotland has remained at a record low causing recruitment difficulties for employers. Scottish businesses across all sectors continue to report widespread inflationary pressures, recruitment difficulties and some supply chain disruption. Concerns over cashflow are rising again. The cost of energy is a major contributor to cost pressures, now affecting almost half of Scottish businesses and becoming a key concern for the rest of 2022. The outlook for the global economy has weakened considerably, with growth in 2022 now forecast at 3%, and all major economies are expected to grow more slowly than previously expected. The UK is also expected to experience a significant slowdown as a combination of high inflation, rising interest rates and higher taxes. The UK economy is now expected to grow by around 4% in 2022 but could stagnate in 2023, while the latest Scottish forecast for 2022/23 shows growth of 4% over 2022 followed by a drop to 1% in 2023 as prolonged high inflation reduces consumer spending and business investment.

This paper makes no recommendations.