Scotland’s economy continues to grow at above trend rate
28 June 2007
The Scottish economy is continuing to grow above trend rate, according to the latest Lloyds TSB Scotland Business Monitor.
This latest edition for the three months ending May 2007 shows 48 per cent of firms surveyed reporting an increase in turnover, 38 per cent reporting static turnover and 14 per cent reporting a decrease, giving an overall net balance of +34 per cent. This is up on the +28 per cent for the previous quarter as well as the +26 per cent of the same quarter one year ago.
These latest results point to a continuation of the recovery in Scottish manufacturing. Service businesses also enjoyed rising turnover in the latest quarter. For the last three months, the net balance figure for turnover of production business was +30 per cent compared with +38 per cent for service businesses. This is the highest result ever in the nine and a half year history of the Business Monitor for service businesses and significantly up on the +34 percent of the previous quarter.
Expectations for increasing turnover in the next six months have been maintained at the high level of the previous quarter at an overall net balance figure of +38 per cent. Expectations are not shared equally between production and service businesses with the net balance for expectations for increased turnover for production business at +30 per cent compared to +44 percent for service businesses. However, both are consistent with a growing Scottish economy.
Service businesses display their confidence for the future while in contrast, production businesses see a greater risk of demand weakening over the next three months. Concerns over the general rate of inflation have increased for production businesses but remain static for service businesses.
Growth in turnover is coming more from new business than from an increase in repeat business although both are contributing. Forty-nine per cent of service businesses reported an increase in the volume of new business in the last three months compared to 43 per cent of production business.
Professor Donald MacRae, chief economist, Lloyds TSB Scotland said: “The Scottish economy continues to grow above its trend rate with high expectations for future growth rising to their third highest level in nine and a half years.
“Despite recent increases in both the rates of interest and inflation, Scottish firms’ concern over inflation and credit costs remain subdued. Consumer confidence remains high reinforced by record levels of employment. The Scottish economy should grow by at least 2.3 per cent in 2007.”
