Quarterly Economic Indicator - Q3 2018
18 October 2018 • Sarah Medcraf
SCOTTISH CHAMBERS OF COMMERCE SURVEY ILLUSTRATES ROBUST TRADING PERFORMANCE, BUT MANUFACTURING CONFIDENCE AND OVERALL INVESTMENT FALL AMID RISING MATERIAL COSTS AND UNCERTAIN POLITICAL ENVIRONMENT The latest SCC Quarterly Economic Indicator Survey for Q3 of 2018 illustrates a broadly positive Scottish economy, but slowing investment across a range of sectors, and a challenging set of results for the manufacturing sector, suggest that the need for certainty on the UK’s Exit for the European Union is paramount. Driven by rising costs of raw materials, the manufacturing sector has posted its first negative result for optimism / business confidence since 2016, despite a reasonably strong set of financial results. Expectations in the sector for future revenue and investment both sit substantially lower than for the previous quarter. The survey has also observed slowing investment trends generally throughout the third quarter, with all sectors bar retail experiencing a decline in investment relative to the second quarter. Our results also show that external pressure continues to act as a challenge for some key sectors, with construction and manufacturing particularly impacted by the rising cost of raw materials. 63% of manufacturing firms indicated that rising raw material prices were acting as a growing cost pressure. KEY FINDINGS / OVERALL NATIONAL RESULTS:
- Generally, robust financial results across sectors, but declining investment and expectations for the future.
- 21% of firms across the sample reported declining optimism, relative to 15% last quarter. This still suggests positive business confidence overall.
- 43% of firms reporting increased overall revenue, with only 17% reporting a decrease.
- 16% of firms reported declining business investment in this quarter, compared to 11% in Q2.
- On a sectoral basis: Construction, Business Services, Manufacturing and Tourism all report declining investment levels this quarter.
- Investment expectations for the future are slowing, with 27% of firms looking to increase investment this quarter, compared to 32% in Q2.
- On a sectoral basis: Investment expectations for the next quarter sit below average for Construction, Manufacturing, and Retail.