Economic Commentary – August 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.

Global growth is expected to be 3% in both 2023 and 2024, with persistent inflation and higher borrowing costs weighing down on activity. UK Growth is expected to be just 0.4% in 2023 and remain subdued into 2026. Business surveys point to a slowdown in global growth in July for both the service and manufacturing sectors. The euro area was the main source of underlying global weakness, but activity slowed across many other major economies. The UK economy continues to be subdued. GDP was up just 0.2% over Q2 2023, marginally better than Q1 (+0.1%). More recent business surveys show activity continuing to grow in July but at a slower page. Performance was uneven, with activity rising in just six out of 12 nations/regions (including Scotland). In July consumer price inflation declined slightly but remained high at 6.8%, while core inflation remained unchanged at 6.9%. Producer input prices fell in June. Scotland’s onshore GDP fell by 0.4% in the 3 months to May, and there were monthly falls in output in March, April and May. Output fell in both the service and the manufacturing sectors which make up the majority of the economy. A quarter of businesses reported increased in turnover in June. This is down from 31% in May. 17% reported a decrease, up from the previous month. 24% reported exporting less and just 16% exported more than a year ago. Scotland’s unemployment rate remains low (4% in April to June), while the employment rate fell over the year to 74.2%. Over a third of Scottish businesses continue to report worker shortages which may have had a knock on affect on wages which rose by 8.2% over the year to July. Intelligence from SE customers suggests that despite ongoing challenges with recruitment, accessing raw materials and rising costs (and for start-ups accessing investment) most businesses are cautiously optimistic and keen to grow.

The paper makes no recommendations.