Scottish economic insights: October 2024

Introduction

The impacts of the inflation and cost of living shock have been persistent for over two years, leading to sustained higher price levels and higher interest rates. While the impacts are continuing to unwind, the economy has undergone a reset over this period with relatively flat economic growth and the impact on household finances more pronounced than during the Covid pandemic.

However, the first half of 2024 has seen an improvement across a range of macroeconomic indicators reflecting a stabilisation and strengthening in economic conditions and expectations of moderately stronger activity over the coming year, coupled with a reduction in interest rates.

That said, some of the improvements are modest and are not consistent across sectors, while higher price levels continue to place pressures on household and business finances and the path of further reductions in interest rates remains uncertain.

The international picture remains equally complex with global growth forecast to strengthen, albeit with slowing growth in the US and China, while the escalation of tensions in the Middle East, alongside the ongoing conflict in Russia and Ukraine, present notable downside risks to that outlook.

This edition of the Scottish Economic Insights provides analysis of recent economic conditions and labour market trends, longer term challenges in productivity, investment and competitiveness and the economic outlook.