Monthly economic brief: February 2022

Output

Scotland's GDP fell 0.4% in December, however remained 0.1% above the pre-pandemic level of February 2020.

• The emergence of the Omicron variant in November 2021 meant that increased restrictions around social interaction, testing and self-isolation, alongside closure of nightclubs, limits on capacity at indoor hospitality and leisure settings and attendance at large events, were introduced over the course of December.
• Scotland's GDP fell by 0.4% in December (UK: -0.2%), the first monthly fall in GDP since August, after three consecutive monthly increases.^[1] As such GDP is estimated to have grown by 1.3% in the final quarter of 2021 (UK: 1.0%) and grown 7% in annual terms in 2021 (UK: 7.5%) following the 10% fall in 2020 (UK: 9.4%).

• At a sector level, output in the services sector was flat in December (0.0% growth), and growth in the construction sector (1.9%) was offset by falls in the production sector (-3.3%).
• Within the services sector, output in consumer-facing services fell by 2.5% in December, including contractions of 3.9% in retail and 3.4% in accommodation and food services, likely reflecting the impacts of Omicron on this broad group. This was offset by growth of 1.8% in the health and social work sector in particular, reflecting higher levels of test and trace and vaccination activity, while output in all other services increased by 0.3%.
• The fall in production output in December (-3.3%), was largely driven by falls in manufacturing output (-3.4%), which fell back in the second half of 2021 following stronger growth earlier in the year, alongside a fall in output in electricity and gas supply (-6.6%).
• There remain differences across sectors in the pace of recovery, which continues to partly reflect the restrictions that have been in place, levels of demand across sectors at this stage of the recovery, and the impact of supply chain disruptions on the pace of activity.

• Within the services sector, output in consumer facing services remains 6.5% below pre-pandemic levels, while output from health, education and public services is 6.2% above, and output from all other services is 1.1% above the level in February 2020.
• Output in the production, construction and agriculture group first returned to pre-pandemic levels in June 2021 before falling back again over the third quarter, driven by volatile output across the manufacturing, construction and electricity and gas supply subsectors. Output in this group fell by 1.9% in December and was 3.9% below its pre-pandemic level.