Scotland’s economic recovery is set slow, according to Donald MacRae, chief economist at Bank of Scotland.

MacRae’s comments follow a series of economic indicators, which he says, suggests tougher times lie ahead in Q3.

MacRae says: “The Scottish economy emerged from recession at the end of 2009 but growth then stalled in the first three months of this year.  The Bank of Scotland PMI showed that the Scottish private sector has been growing for 13 successive months, beginning in July of last year.

The Confederation of British Industry’s index monitoring Scottish manufacturers’ sentiment fell from +20 in Q1, to 0 in Q2, while Scottish consumer confidence remained negative in July, with market research agency Gfk NOP’s Consumer Confidence Index posting a net balance of -22 in July.

However, Scottish firms were more bullish on hiring in July. The Bank of Scotland Report on Jobs’ seasonally adjusted Permanent Vacancies Index signalled increased demand for long term workers, as has been the case in each of the past eight months. However, the pace of vacancy growth has slowed recently.

And July’s Bank of Scotland (purchasing managers’ index) PMI shows that the ratio of new orders to inventories at manufacturing plants, remained above parity in July. New orders are rising at a faster pace than inventories, meaning that manufacturers will need to raise output to satisfy higher demand, as stocks of finished goods become depleted. The ratio hit a six month high of 1.19 in June, but fell slightly to 1.17 in July.

“This latest update of the Index of Indicators shows the tentative recovery slowing in the autumn as both consumer and business confidence continue to be dented by widespread concerns over the effect on jobs and contracts of future cuts in government spending.

 
“Growth may be reduced but not extinguished. Manufacturing continues to display robust growth and an equally robust expansion of exporting activity. Travel, tourism and leisure growth outstrips business and financial services.  However the uncertainty caused by concerns over government spending cuts can only be dispelled by clarity on their scope, extent and size – the sooner the better.”