The Economy - Don't Panic But Do Worry - Read This But It Will Not Cheer You Up
8th August 2022
James Black has written this item for the Fraserof Allander Institue and it appeared in the Herald on 5th August 2022.
James is a Fellow at the Fraser of Allander Institute. He specialises in applied analysis of trade and climate change. His work includes the production of economic statistics to improve our understanding of the economy, economic modelling and analysis to enhance the use of these statistics for policymaking, data visualisation to communicate results impactfully, and economic policy to understand how data can be used to drive decisions in Government.
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This year has not seen the return to normality that many businesses hoped for. Supply chain disruption, rising prices, hiring difficulties, interest rate increases, and lack of confidence are taking their toll. Many economic organisations are now forecasting potential slowdowns in the UK and globally, but significant uncertainty remains around forecast business conditions.
One of the challenges in predicting slowdowns is the timing. Robust data often takes months to collect, so we often do not know if the economy has started slowing until months after it begins.
It's helpful to step back and look at the significant economic drivers in times of such uncertainty. Survey snapshots, such as our recently published Scottish Business Monitor sponsored by Addleshaw Goddard, can provide some hints. So, what are businesses saying about their current performance and expectations for the coming year?
Starting with the positives, more businesses reported an increase in sales volume in the year's second quarter than a fall, resulting in a net balance of +15%. This net figure is reasonably high, and this level hasn't been seen in our survey since 2014. Employment, new business, and capital investment indicators also remained positive for the second quarter.
On the face of it, businesses have been remarkably resilient. Few people predicted emerging from one of the greatest human health crises in over a century with unemployment rates near record lows. Scottish onshore GDP grew by 0.6% in May, now 1.1% above February 2020 levels of output.
But concerns are now starting to emerge in the data. The net balance of the sales volume is still positive but has weakened since the start of the year. Looking ahead to expectations over the next six months, the positive but weakening finding is consistent across many indicators such as business volume, new business, and employment.
Read the full article HERE
