Scottish Chambers of Commerce comment on Revised GDP Figures for Scotland and Inflation

Quarterly National Accounts and Revised GDP Figures for Scotland

The latest Quarterly National Accounts for Scotland have brought welcome news, with Scotland’s GDP revised to higher levels from the initial estimate provided in June 2018.

Commenting on the figures, Liz Cameron, Chief Executive, Scottish Chambers of Commerce said:

“Revised GDP Figures for Scotland suggest that Scotland’s GDP has outpaced the UK for the first quarter of 2018, with the growth rate increasing to 0.4% on the quarter, relative to the UK rate of 0.2%.   On an annual basis, Scotland’s growth rate is just above the UK’s, at 1.3% compared to 1.2%.   This was mainly driven by an increase in output across the services and production sectors, with construction continuing to observe a drop in output, put at 1.4% in this estimate.

“Positively, despite some of the challenges for manufacturers that we’ve seen highlighted in today’s inflation statistics, the Index of Manufactured Exports contained in the QNAS showcases an increase of 8.7% in the volume of manufactured exports on an annual basis, alongside quarterly growth.  Quarterly growth was mainly driven by increases in exports of food and drink and engineering products.

“This is great news for Scotland, but concerns remain that the construction industry continues to experience falls in output, with GDP also remaining below historical growth trends.  The upcoming Programme for Government presents a critical opportunity for the Scottish Government to invest in our national infrastructure, in order to jumpstart our construction sector and provide the foundation for increased growth rates for the entire economy.  We look forward to the Scottish Government presenting an ambitious programme, in partnership with the private sector, to boost Scotland’s growth.”

Inflation

The latest UK inflation figures for October show that consumer price inflation (CPI) has increased from 2.4% in June to 2.5% in July 2018.    This is the first rise observed in the CPI rate since November 2017.

The CPI rate was driven by a range of factors, including rises in the price of computer games and transport costs.  A fall of 0.4% in the price of clothing and footwear acted to partially offset these upward contributions.

Commenting on the figures, Liz Cameron, Chief Executive, Scottish Chambers of Commerce said:

“The increase illustrated today in the CPI rate had been predicted by the Bank of England in their latest inflation report, and thus was expected.  However, the prospect of inflation rising again will bring little comfort to consumers, especially given the slowing wage growth observed in the latest labour market statistics.

“Our domestic producers will also be concerned in some of the changes observed in the Producer Price Inflation index.  Although the headline rate of PPI has fallen from 3.3% to 3.1% for July 2018, input prices for fuels and materials have risen to 10.9%.   The annual rate of inflation for input prices is now at the highest level since May 2017, driven particularly by substantial increases in crude oil prices.   A weaker pound, alongside increases in fuel prices and imported metals, further drove up the rate of change.

“Both consumers and producers will find little to be positive about in today’s statistics.  In particular, producers will be feeling the strain as output prices fall slightly, despite a range of pressures driving up input costs.   In this environment, it is critical that both the UK and Scottish governments act to provide certainty in areas such as taxation.  Furthermore, the UK Government should continue to negotiate with our partners on the international stage to mitigate the increasing prevalence of higher tariffs, in order to safeguard the manufacturing industry and exports.”