Outlook and appraisal [November 2011]

Ashcroft, Brian (2011) Outlook and appraisal [November 2011]. Fraser of Allander Economic Commentary, 35 (2). pp. 4-19. ISSN 2046-5378

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In the June Commentary we stressed that the Scottish economy was threatened with stagnation as the rate of recovery slows. This threat is even more real today than it was then. Growth has continued to weaken in the global economy and is weaker in the UK and Scottish economies too. The UK economy has effectively stagnated over the last year, growing by only 0.5%. In Scotland growth was flat between April and June and business surveys suggest continuing weakness in the third quarter. The UK has recovered more strongly than Scotland, by nearly 3% compared to around 1% to 2% in Scotland, even though the recovery is weak overall. There is little comfort in the latest GDP data for both Scotland and the UK. This is underlined by the latest US real GDP figures which reveal an annualised growth rate of 2.5% for the third quarter of this year. Growth in the US is still weak by the standards of previous recoveries and insufficient to make much of a dent in the high levels of unemployment. Yet, it is notable that with the latest quarter's results, GDP in the US economy moved back above its pre-recession peak output, whereas the UK and Scotland are still - in the second quarter - 5% and 4%, respectively, below their pre-recession GDP. It will not go unnoticed that, unlike the UK, the US has only recently adopted an austerity programme, which has yet to kick in. We therefore welcome the Bank of England's decision to undertake a further expansion of the money stock through quantitative easing and note that there is still scope for some fiscal easing without damaging our fiscal credibility in the long-term.