State of the economy

21 Aug 2015 12:39 PM

Economic growth resilient despite challenges.

The Scottish economy has seen its longest period of uninterrupted growth since 2001.

The recent State of the Economy report, published by the Scottish Government Chief Economist, highlights that the Scottish economy saw its eleventh quarter of expansion at the start of 2015, recording growth across all main sectors of the economy.

The report notes that continuous growth over the last three years – despite challenging conditions – demonstrates the resilience of Scotland’s economy and has driven positive trends in the labour market.

Employment levels reached record highs over the last year, unemployment is close to its pre-recession average rate, and there are now signs that real wages are rising.

These trends have combined with other factors – rising house prices, growing consumer confidence and low inflation – to boost household incomes and spending, which have been positive for the economy.

However, both internal and external challenges remain. For example, from further tightening of budgets by the UK Government, the impact of low oil prices on oil and gas sector profitability and investment, and subdued demand in global export markets alongside the strength of the pound.

The report highlights:

 

• The quarterly growth of 0.6 per cent in quarter one of 2015 signalled the longest continuous expansion in the Scottish economy since 2001.
• Growth in quarter one was broad-based although construction stood out with very strong growth underpinned by public investment, including in infrastructure and housing.
• With employment at or around record levels, the pace of jobs growth is likely to ease, paving the way for a pick-up in productivity growth and real wages.
• The continuing improvement in economic conditions is fostering confidence and investment – visible in rising house prices and high levels of inward investment – and these areas will drive growth throughout 2015.
• External risks remain – low oil prices will continue to have a material bearing on economic conditions in related service activity and slowing growth in China will weigh on global demand.
• Nonetheless, data and forecasts point to a positive outlook for the rest of this year and independent forecasters predict growth in the Scottish economy of around 2.4 per cent in 2015.

Commenting on the report, Deputy First Minister John Swinney said recently:

“Today’s State of the Economy report shows almost three years of uninterrupted growth – the longest continuous period of economic expansion Scotland has seen since 2001.

“The most recent figures for this year show all main sectors of the economy recorded growth and our programme of investment in public infrastructure is paying off, helping support a particularly strong performance in the construction sector. The benefits from this investment will underpin future growth in the Scottish economy and is the appropriate response in order to support and grow the economy rather than the UK Government programme of austerity.

“Although Scotland has not been immune to the global economic challenges over the last few years and there is undoubtedly still work to be done, these figures show our economy’s underlying resilience – with positive trends apparent in both employment and investment levels.

“Just last week we also saw youth employment reach highs not seen since 2005 and the lowest youth unemployment level and rate since 2008.

“The Scottish Government remains committed to building a fairer, more sustainable, and more resilient economy, translating into real opportunities for business and added security for workers and families.”