Fraser Of Allender Institute Gloomy Outlook For The Economy

5th July 2022

Our new growth forecasts predict a difficult year to come for the economy.

Much of our work this week has focussed on the publication of our Quarterly Economic Commentary. We publish this every quarter, bringing together all the latest data on the UK, global and Scottish economy, producing new forecasts for Scotland, and analysing key issues as special topics in each edition.

The headlines from this edition are, unfortunately, pretty gloomy reading. In interviews about the commentary this week, we were often asked if there was any good news to be had at all. It is fair to say that it is quite hard to see any.

We've cut our forecasts for 2023 from 1.5% to 0.5%, as inflation is likely to persist for longer than we expected in the forecasts we produced in March. Our growth path for the rest of this year also suggest very weak growth over the remainder of 2022, with an expected contraction in the economy towards the end of the year as inflation peaks.

Another focus in the reporting of the Commentary was the analysis we did of the ONS Opinions and Lifestyle Survey. Worryingly, this data from late April/early May showed that over half of respondents are spending less on non-essentials, with a third saying that they are spending less on food and other essentials.

The latest contraction leaves the economy 0.6% above pre-pandemic (February 2020) levels of output. In April, there was minimal change in output across the production, construction, and agriculture sectors. On the other hand, services, which make up three-quarters of the Scottish economy, fell by 0.7%.

It is worth noting that (despite the messages coming from the survey we discuss above) this contraction in services was not driven by consumer­­­­-facing services, which grew by 1.1% in April. Instead, this contraction was primarily driven by health and social work and professional services.

By comparison, across the UK, total GDP and services output fell by 0.3% in April. The decline in output across services was primarily due to contractions in the human health and social work sector.

Driving this was a fall in human health activities, which contracted by 7.6% in April, largely due to a significant scale-back of the NHS' Test and Trace and vaccination activity during this period, which is also likely to be driving the Scottish contraction in this sector.

Overall, despite a contraction in the latest month, the UK economy, like the Scottish economy, remains above pre-pandemic levels.

Read the full article at -
https://fraserofallander.org/weekly-update-our-new-growth-forecasts-predict-a-difficult-year-to-come-for-the-economy/