Economic Commentary – October 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 economic growth remains slow and is expected to be 3% in 2023, falling to 2.9% 2024. Developing and emerging economies are expected to grow much faster than advanced. UK growth is expected to be the lowest of G7 economies at just 0.5% in 2023 and 0.6% in 2024. Business surveys also point to slowing global activity. Performance in the UK and Euro-zone economies was particularly weak in September as both service and manufacturing sector output declined. The UK economy continues to be subdued. GDP was up just 0.2% in August, after a fall of 0.6 in July. Performance was poor in 11 out of UK 12 countries and regions as business activity fell, with only London showing growth. In the year to September, consumer price inflation remained high and unchanged from August at 6.7%, and core inflation fell by 0.1pp to 6.1%. Annual producer input price inflation fell by 2.6% in September – the fourth consecutive monthly fall. Scotland’s onshore GDP grew by 0.1% in July, as manufacturing output rose, whilst service sector and construction output both fell. The value of Scotland’s good exports increased by 12.6% in the year to June, although 20% of Scottish exporters reported selling less overseas than a year ago, and just 17% sold more. Scotland’s unemployment rate remains low (4.3%), while the employment rate fell slightly over the year to 75.1%. Around a third of Scottish businesses continue to report worker shortages which may have had a knock-on effect on wages which rose by 8.2% over the year to September 2023. Intelligence from SE customers suggests that despite ongoing challenges with skills shortages, availability of suitable property and access to finance/investment for some, most are generally positive, optimistic and able to identify growth opportunities. The Fraser of Allander Institute is predicting subdued economic growth for Scotland into 2025 as inflation and interest rates remain high, putting pressure on household incomes.

The paper makes no recommendations.