Economic Commentary August 2024

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.

• The IMF is forecasting global GDP growth of 3.2% over 2024 and 3.3% in 2025. Emerging and developing market economies are
  expected to grow much faster than advanced economies.
• Business activity continued to increase across all major global economies in July, with the US showing the strongest growth and
  the Euro-zone the weakest. However, growth is being driven by the service sector, with manufacturing generally contracting
  (except in the UK).
• The UK economy grew for the second quarter running in Q2 (+0.6%), continuing recovery from the recession at the end of 2023.
• The Scottish economy grew by 0.3% in May, following +0.2% in April. In the three months to May, GDP was up 0.9%, slightly below
  the UK (+1.0%).
• Business activity rose across ten out of twelve UK nations and regions in July, with Scotland the fifth strongest performer. In
  Scotland, business activity growth was driven exclusively by the service sector, as manufacturing output continued to decline.
• Headline consumer price inflation rose to 2.2% in July, although core inflation eased. The Bank of England cut interest rates by
  0.25 percentage points to 5.0% in August.
• In June, the proportion of businesses reporting a growth in monthly turnover fell to 24% (vs 30% over February-May). The main
  challenges affecting turnover continue to be the cost of labour, competition, and economic uncertainty.
• High interest rates, coupled with weak economic growth forecasts, may be impacting Scottish business’ confidence to invest –
  just 16% of plan to increase capital investment between July and September 2024.
• The Scottish labour market is showing signs of cooling: unemployment increased over the year to June to 4.4% (vs 4.2% for the
  UK), whilst the employment rate fell to 73.4%. Worker shortages and recruitment difficulties remain an issue for Scottish
  businesses.
• The main challenges exerting pressure on SE customers include staffing, issues related to property availability and suitability, the
  cost of raw materials and the cost of labour. Despite this, general sentiment among SE customers remains positive.
• The Bank of England is forecasting UK GDP growth of 1.25% this year, falling to just 1% in 2025. For Scotland, the EY Item Club
  expects growth of 0.9% in 2024, strengthening to 1.7% in 2025

The paper makes no recommendations.