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Economic Commentary – May 2013
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Monthly Economic Commentary
 IMF downgrades global growth prospects
 Eurozone remains recession
 Scottish economy expands in Q4 2012
Global Trends
In April the International Monetary Fund (IMF) lowered its
growth forecast for most of the major advanced
economies, warning that road to recovery will remain
‘bumpy’. The IMF now predicts that global growth will be
3.3% in 2013, down from an earlier forecast of 3.5%,
before picking up to 4% in 2014. The US is expected to
outperform other advanced economies in 2013 with growth
of 1.9%, while the UK growth is forecast to expand 0.7%.
Eurozone output is expected to fall by 0.3%.
IMF GDP Forecasts
Global
US
Euro area
UK
Japan
China
2013
3.3%
1.9%
-0.3%
0.7%
1.6%
8.0%
2014
4.0%
3.0%
1.1%
1.5%
1.4%
8.2%
Source: IMF World Economic Outlook (April 2013)
In the US, the world’s largest economy, output is
expanding at a moderate pace. Official figures show that
GDP growth in Q1 2012 was 2.5% (annualised rate), up
from 0.4% in the final quarter of last year, supported by
strong consumer spending. More recent US business
surveys indicate that both the manufacturing and service
sectors expanded in April, but at a much slower pace than
the previous month.
The US labour market shows
continued signs of improvements, with employment up by
165,000 in April and job estimates for February and March
being revised upwards by a total of 114,000.
The
unemployment rate now stands at 7.5%, the lowest in four
years.
The eurozone, Scotland’s main overseas trading partner,
remains in recession. GDP in Q1 2013 shrank by 0.2%,
the sixth quarterly contraction. Business survey data for
April indicate an ongoing steep downturn for the eurozone,
with the overall level of output contracting for the 15th
consecutive month. Declines were reported by both the
manufacturing and service sectors. Within the eurozone,
output in April declined in each of the four largest nations.
German output contracted for the first time since
November 2012, while the output falls continued in Spain,
Italy and France, although the rates of decline eased for
the latter two. Eurozone unemployment rose to another
record high of 12.1% in March. The eurozone accounts for
around 45% of Scotland’s exports, so any weakness is
likely to affect demand for Scottish goods and services.
In China, the world’s second largest economy, recent data
suggest a slight slowing of growth momentum. GDP
growth for Q1 2013 was 7.7%, lower than forecast and
down from the 7.9% reported in the final quarter of 2012.
Industrial production also recorded a smaller than
expected increase, with output increasing 9.3% in April
compared to a year ago. A separate survey has also
suggested that manufacturing activity grew at a slower
pace in April, mainly due to fall in exports on the back of
weak global demand.
GDP in Japan, the world’s third largest economy,
expanded at its quickest pace in a year, growing by 0.9%
in the three months to March, indicating signs of economic
recovery. Growth has been driven by recent policy
measures which have lead to an increase in domestic
demand and a depreciation of the yen which has helped to
boost in exports. As a result the economy is expected to
strengthen further in 2013.
UK Trends
The UK economy expanded in the first three months of the
year, avoiding a triple-dip recession. Overall, though,
growth has been broadly flat over the last eighteen
months. The latest estimate of GDP for Q1 2013 shows
an increase of 0.3% with the largest contribution from the
service sector posting growth of 0.6%, which helped to
offset a fall of 2.5% in the construction sector. There was
also a small increase in output from the production sector
of 0.2%.
More recent UK business survey data indicated that better
Q1 performance continued into Q2. There was a slight
improvement in the business activity in April, with
continued growth in the service sector and signs that both
the UK manufacturing and construction sectors are
stabilising. In the service sector, a solid increase in
business activity was driven by the strongest rise in new
orders since last May. Within manufacturing, levels of
production and new orders rose slightly after contracting in
the previous two months. Manufacturers also saw a
modest improvement in new export sales where weak
demand in Europe was more than offset by increased
sales to North America, the Middle East, Latin America
and Australia. On the less positive side, UK construction
activity fell for a sixth consecutive month in April, however
the rate of decline is easing.
UK inflation remained at 2.8% in March, its highest level
since May last year.
Looking ahead, the Bank of
England’s latest inflation report indicated an improved
outlook for both inflation and growth. The BoE is now
predicting GDP growth of just over 1% for 2013 and
expects inflation to fall back to its 2% target within two
years time. A strengthening of sterling and a drop in oil
prices have helped to ease price pressures in recent
weeks.
In the labour market, UK employment stood at 29.7 million
in the three months to March 2013, a decrease of 43,000
on the previous quarter. Unemployment increased by
15,000 to reach 2.52 million. The ILO unemployment rate
now stands at 7.8%. Average growth in earnings slowed
to 0.4% y/y, compared to a rate of 0.8% in the previous
month. This was the slowest rate of growth since 2009
and is below the inflation rate of 2.8%, suggesting the
squeeze on consumer spending power continues.
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This commentary reflects our understanding of issues at the time of writing and should not be taken as Scottish Enterprise policy. If
you have any comments or suggestions for improvement, please email Joanne Liddle ([email protected]) or phone 0141
228 2242.
Economic Commentary – May 2013
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Scottish Trends
Official figures show that the Scottish economy expanded
in the final quarter of 2012. Scottish GDP increased by
0.5% in Q4 2012, significantly better than the UK economy
as a whole which contracted by 0.3%. The Q4 figures
indicated growth in the service sector (+0.3%) and the
construction sector (+0.6%). Output of the production
sector grew by 1.1%, although within this the
manufacturing sector contracted by 0.5%. On an annual
basis Scottish GDP growth was 0.4%, compared to 0.1%
for the UK as a whole.
Performance of SE Account Managed (AM) Companies
Scottish Enterprise regularly surveys its account managed
companies to get feedback on business conditions. Data
below highlights AM company performance by sector. The
data covers surveys carried out between October 2012
and March 2013 with feedback from 1,070 companies.
Labour market statistics for Scotland show the total
number of people in employment was 2.51 million in the
three months to March 2013, an increase of 54,000 over
the previous quarter. This was the largest quarterly rise in
65%
60%
50%
45%
45%
45%
40%
45%
30%
20%
20%
SE Average
Life
Sciences
Financial &
Business
Services
Tourism
0%
Reported exports performance is positive amongst
exporters across all sectors. Exporting companies within
energy (net balance of +55%) and food & drink (+45%)
were particularly likely to have reported an increase rather
than a decrease in overseas sales.
Export Performance by Growth Sector
(Net balance of firms reporting an increase
in the six months prior to survey )
80%
60%
55%
45%
40%
40%
35%
35%
40%
20%
0%
SE Average
Scottish total retail sales in April 2013 were 2.1% down on
the same month the previous year. Total food sales were
down 1.4%, the biggest fall since January 1999. However
this is likely to have been distorted by the timing of Easter,
which fell in March this year but April the previous year.
Total non-food sales declined by 2.7%, with clothing and
footwear particularly affected by the prolonged cold
weather.
80%
Technology
&
Engineering
The Scottish Index of Manufactured Exports shows that
the volume of manufactured exports fell by 1.4% in Q4
2012. Over the quarter, the largest contributor to the
decline was the Chemicals, Coke, Refined Petroleum
Products and Nuclear Fuel sector (-3.6%) and from
Engineering & Allied Industries (-4.5%). On an annual
basis, the volume of manufactured exports fell by 2.9%.
The latest results show that export volumes remain around
10% below their pre-recession level.
Turnover Performance by Growth Sector
(Net balance of firms reporting an increase
in the six months prior to survey)
Life
Sciences
The latest Bank of Scotland PMI business survey for April
signalled a strengthening of growth in Scottish private
sector business activity.
Scottish business activity
increased at its fastest pace for a year, outperforming the
UK as a whole. Growth was broad-based across sectors,
with manufacturing returning to growth and a further rise in
service sector activity. New business orders increased for
the fifth consecutive month. However, new orders are
being mainly driven by domestic demand as there was no
change in the level of export orders. Employment levels
increased in April, with similar rates of increase across
both manufacturing and services.
Technology
&
Engineering
2012
Creative
Industries
2011
UK
Creative
Industries
2010
Scotland
Food &
Drink
2009
Food &
Drink
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Over this period, a net balance (i.e. % of companies
reporting an increase less the % reporting a decrease) of
45% of companies reported increased turnover, 25%
reported increased employment and 40% reported
increased exports in the six months prior survey.
Considering sectors, energy companies were the most
likely to report growth in turnover (net balance of +65%)
followed by food & drink (+50%).
Energy
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
Energy
Quarterly GDP Growth (%)
2008
employment on record. Scotland’s employment rate now
stands at 71.8%, above the UK rate of 71.4%.
Unemployment fell by 7,000 over the period, with a total of
199,000 people now out of work. The ILO unemployment
rate now stands at 7.3%, below the UK average of 7.8%.
Figures for youth unemployment (16 to 24 year olds) show
a decrease of 27,000 over the year, to reach a total of
67,000. The youth unemployment rate for the period
January to March 2013 was 16.6%, lower than the UK rate
of 20.3%
Strategy & Economics,
May 2013
____________________________________________________________________________________
This commentary reflects our understanding of issues at the time of writing and should not be taken as Scottish Enterprise policy. If
you have any comments or suggestions for improvement, please email Joanne Liddle ([email protected]) or phone 0141
228 2242.