Economic Commentary – April 2023

The Economic Commentary provides a regular 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.

Business activity rose across all the world’s largest economies in March. The upturn was driven primarily by the service sector, with manufacturing performance weaker. However, the IMF is describing the economic outlook as ‘uncertain again’ and has slightly downgraded its forecast for global economic growth this year to 2.8%, rising modestly to 3.0% in 2024. The UK is still expected to be the worst performing G20 economy in 2023, with output declining by 0.3%. UK GDP flatlined in February, following growth of 0.4% in January. In the three months to February, the UK economy grew by just 0.1%. More recent data showed UK business activity increasing in nearly all nations and regions in March. There was a continued softening of cost inflation and business optimism rose. The Bank of England increased interest rates to 4.25% in March to help combat high inflation which rose to 10.1% in March. The BoE expect inflation to fall just below 4% by the end of 2023. Scotland’s onshore economy grew by 0.9% in January, after contracting by 0.8% in December. Service sector output, which accounts for around three quarters of the economy, increased by 0.5%, and manufacturing output was up 3.9%. Construction output, however, declined (-1.8%). A third of Scottish businesses reported an increased turnover in February and business performance expectations for the coming year have picked up since the end of 2022. Scotland’s employment rate rose to 75.7% in February, and the unemployment rate fell to 3.0%. Worker availability declined in March for the 26th month in a row, and 38% of businesses in Scotland are reporting worker shortages. Scotland’s tight labour market is pushing up wages; however, pay rises are failing to keep pace with inflation.

The paper makes no recommendations.