Forecasts of the Scottish economy [November 2014]

The latest figures indicate that the Scottish economy has picked up strongly in the first half of 2014, in line with a surge in leading indicators across business surveys. It is likely however that this has eased as we turned into the later part of this year, suggesting that the rate of growth will slow. Where 2014 has exceeded our earlier expectations, we have revised our forecasts for growth (upwards) and unemployment (downwards) from June’s Commentary. It remains unlikely that we will see a renewed expansion in activity given the scope for potential downside risks from, in particular, weak growth and deflation fears in the Eurozone; weak export growth; debt constrained households unlikely to continue to support economic activity and only slowing improving outlook for investment through 2015. Revisions to the data for the UK, to be implemented in Scottish statistics next year, will make somewhat difficult to make direct comparisons about the recent trajectory of the UK and Scottish economic performances: however the general picture, of slow and unsteady growth for Scotland is likely to characterise developments through the coming years.