Economic Commentary - June 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.

Recent business surveys showed a sustained increase in private sector output across most major economies in May. The upturn was primarily driven by the services sector whilst growth in the manufacturing sector was much more subdued. Global growth is expected to be 2.7% in 2023, increasing slightly to a ‘still subdued’ +2.9% in 2024. Performance of emerging/developing economies is forecast to be far stronger than advanced economies. The UK is expected to be one of the weakest performing OECD economies, growing by just 0.3% this year and 1% in 2024. UK GDP grew by 0.2% in April, following a contraction of 0.3% in March. In the three months to April, the UK economy grew by just 0.1%. More recent business survey data showed UK business activity increasing in nearly all nations and regions in May, but growth eased, particularly in Scotland. Business confidence remained positive. In April, consumer price inflation slowed slightly but remained high at 8.7%, whilst producer input price inflation fell to 5.4%, continuing a downward trend but still above the longer-term average. Scotland’s onshore GDP grew by 0.4% over Q1 2023 (vs +0.1% across the UK as a whole). Over the quarter however, the rate of growth eased month-on-month. Just over a quarter of Scottish businesses reported an increase in turnover in April (vs March), while 25% reported a decrease. Over a third expect business performance to increase over the next year, a slightly lower proportion than in recent months. Scotland’s unemployment rate remains low (3.1% in April), while the employment rate fell to 74.6% and economic inactivity rate increased to 22.9%. Over a third of Scottish businesses are reporting worker shortages. Intelligence from SE customers suggests optimism is rising, as are intentions to invest and grow. However, skills shortages continue to be a challenge. The Scottish Fiscal Commission are forecasting economic growth of 0.2% for 2023. Performance is expected to be subdued over the longer term.

The paper makes no recommendations.