Amid the Brexit chaos, there are signs Scotland’s economy is holding up better than might be expected, writes Bill Jamieson.
Are we happy bunnies? Most certainly not, as most pointers of our well-being and confidence would attest: an economy with barely a pulse, warnings of chaos and supply disruption at ports, higher food prices, the onset of Brexit-date jitters – and panic-driven toilet roll stock-piling to the fore.
If you wanted a new statistical pointer to the overall state we’re in, surely a chain-weighted Loo Roll Stockpile Index (seasonally adjusted) must now be in contention.
But are households as confidence-bereft as confidence survey responses suggest? If so, what or who is keeping the economy afloat?
Look no further than the mirror. Far from drawing in our horns and snapping our purses tight, overall household spending continues to rise – up by 0.4 per cent in real after-inflation terms in the second quarter of this year compared with the opening three months. And when measured against the second quarter of last year, the volume (inflation-adjusted) measure is up by 1.1 per cent.
Beleaguered stores with high street outlets may be wilting under the onslaught from online retailers. But, according to data this week from the Office of National Statistics (ONS), consumer spending across the UK hit ￡338 billion in the April-June period – an all-time high.
Are we running down our savings? Not so. The ONS figures show families were able to save more – 6.8 per cent of incomes on average (up from 6.4 per cent in the previous three months) with 2.5 percentage points going into pensions and 4.3 per cent in other investments, the most in more than three years. As for growth in credit card lending, this slowed to its lowest in more than four years.
These figures matter because consumer spending accounts for some 60 per cent of the UK economy, and suggest that households are less vulnerable to a downturn than widely thought. Andrew Wishart of Capital Economics says the savings figures “give us some confidence that household spending will continue to underpin growth”.
Meanwhile, the average income is growing by four per cent a year – its fastest for a decade – and now stands at ￡28,184.
Now those household spending figures are flattered by a sharp growth in household items, with electricity, gas and other fuels well to the fore – hardly the sort of spending therapy that lifts consumer morale.
So how do we fare against other countries? Amid the relentless focus on how Brexit uncertainty is hitting the domestic economy, it’s easy to lose sight of comparisons of Scotland’s international standing in terms of GDP per head and material well-being.
With an election pending, we will be bombarded with competing claims on our economic state. But if the gap between household confidence indices and actual spending behaviour is not puzzling enough, prepare for more.
Professor John McLaren, in his latest analysis of international ranking measures, finds three vying for attention – with each showing different results.
For example, Scotland’s Gross Domestic Product per head last year was the 16th highest across 35 OECD countries – eight places lower than cited at the time of the independence referendum White Paper due to a smaller contribution from North Sea output. But we are still above the ranking for the UK overall.
On Net National Income per head, Scotland comes out 13th highest across a selection of 34 OECD countries and equal to the rankings for the UK.
Finally, measured by Gross Domestic Household Income (GDHI) per head, Scotland was 17th highest across a range of 33 OECD countries in 2017, and below the ranking for the UK.
Moving across the three measures, the ranking of some countries changes markedly: Ireland moves from 2nd to 19th, and the US from 5th to first. Little wonder many are driven to more straightforward measures such as unemployment, numbers in work and average earnings.
For the moment, we have been holding up better than the Westminster political mayhem and confidence surveys would suggest. But all this looks fraught and fragile as we approach the October 31 Brexit deadline with huge uncertainties still unresolved.