economic overview and outlook scottish supply chain conference september 2012
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Economic Overview and Outlook Scottish Supply Chain Conference September 2012. December 2010. Kenny Richmond Scottish Enterprise. Scottish Enterprise. We work with businesses across Scotland to stimulate economic growth and improve the business environment. - PowerPoint PPT PresentationTRANSCRIPT
December 2010
Economic Overview and Outlook
Scottish Supply Chain Conference
September 2012
Kenny RichmondScottish Enterprise
2
Scottish Enterprise
We work with businesses across Scotland to stimulate economic growth and improve the business environment.
We help companies we work with to raise their sights and ambitions and consider their business from a global perspective.
We work in partnership with universities, colleges, local authorities and other public sector bodies to maximise our contribution to the Government Economic Strategy.
Scottish Enterprise - where we are
3
Latest Economic Trends
• Global growth weakening since Q1….• ….mainly due to eurozone problems (sovereign
debt and banking crisis)…• …affecting global business and consumer
confidence… • …and demand for exports from US, UK, China
etc.• Other ‘headwinds’ affecting global growth:
– government austerity in many countries– indebted businesses/consumers paying of
debt rather than spending/investing– access to finance an issue for some (banks
rebuilding balance sheets)– rising commodity prices (oil +25% since
June, some foodstuffs)– weak incomes growth in advanced
economies
World GDP growth (quarterly % change)
-8
-6
-4
-2
0
2
4
6
8
%
Source IMF
Source: Markit
Source: IMF
Weakening economic activity across all major economic blocs
Manufacturing - China
Economic activity slowing or falling across most major economies according to business surveys (score of <50 indicates contraction)
• Eurozone near (or in?) recession with weakness spreading from ‘periphery’ to ‘core’ countries
Source: Markit
• US (world’s largest economy) – manufacturing affected by weakening demand for US exports
• China (world’s 2nd largest economy) – manufacturing activity falling as global export demand weakens
Forecast GDP Growth (%)
-10123456789
2012 2013Source: IMF, Fraser of Allander Institute
% Emerging economies
Advanced economies
Short term global economic prospects
62% of world economy 38% of world economy
• Growth expected to be:
– stronger in 2013
– weaker in advanced economies (that make up most of the global economy).
• IMF, OECD etc have downgraded 2012 & 2013 forecasts – and are expected to downgrade again
• Eurozone the main risk to global
Global economic growth trends – implications for Scotland (exports)
2012 2013
USA2.0% 2.3
%
Canada2.1% 2.2
%
2012 2013
Euro area –0.3% 0.7%
Germany 1% 1.4%
France (5 0.3% 0.8%
Italy –1.9% –0.3%
Spain –1.5% –0.6%
2012 2013
3.4% 4.2%
Europe
North America 2012 2013
2.4% 1.5%
Japan
£3.8bn
£0.3bn
£11.7bn
£0.8bn
High growth
Medium growth
Low growth
Latin America
UK
£1.6bn
£45bn
GDP growth forecast
£2.1bn
2012 2013
Mid East & N Africa 5.5 3.7
Sub Saharan Africa 5.4 5.3
2012 2013
DevelopingAsia
7.1 7.5
China 8 8.5
India 6.1 6.5
Developing Asia
2012 2013
0.2% 1.4%
Scottish exports 2010
Source: IMF, Scottish Government
UK and Scottish Trends
• Consumer/household spending under pressure– Weak incomes growth– Labour market uncertainty– Paying down debts
• Business investment slowing - blip or trend?– Uncertainty of demand– Focus on efficiencies rather than long term
investment– Increasing hrs worked rather than investing in
new machinery– Repair and maintenance rather than new
• Government spending– Most cuts still to come
• Export markets – Some softening in key markets
Implications for ‘rebalancing the economy’??
Source: Nationwide
Scottish export performance
Index of Scottish Manufactured International Exports (1998 Q1=100)
75
80
85
90
95
100
105
110
• Official data up to 2012 Q1 suggests softening export activity
• More recent business surveys suggest falling export orders esp from eurozone
• Some indications of growth in exports to non-EU countries
Lloyds TSB Scotland Business Monitor
Net Balance of businesses reporting increased exports
Source: Scottish Government
Scottish Economic Performance
Quarterly GDP Growth (%)
-2.5-2.0-1.5-1.0-0.50.00.51.01.5
UK
Scotland
No Scottish data yet
• Official data shows Scotland in recession Q4 2011 and Q1 2012
• More recent Scottish business survey data suggests continued fall in GDP in in Q2 and Q3
Bank of Scotland PMI Survey
Source: Scottish Government
Scottish economic performance by sector
GDP Quarterly Growth Rates (%), Construction
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007 2008 2009 2010 2011 2012
Source: Scottish Government
GDP Quarterly Growth Rates (%), Services
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007 2008 2009 2010 2011 2012
Source: Scottish Government
• Scottish GDP fall due to significant contraction in construction (7.5% of the economy)
• Service sector (73% of the economy) showing weak growth
• Manufacturing performance (12.5% of the economy) also relatively weak
GDP Quarterly Growth Rates (%), Manufacturing
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007 2008 2009 2010 2011 2012Source: Scottish Government
Global economic trends – implications for Scotland
• General uncertainty – hitting Scottish business and consumer confidence• Weakening growth in export markets – declines in export orders for some (but not
all) companies• Eurozone crisis
– sterling/euro exchange rates becoming less favourable – availability and cost of funds for lending – UK banks’ exposure to eurozone
• UK government austerity – most spending cuts still to come (implications for capital investment, procurement opportunities, general ‘spill overs’)
• Rising prices for some commodities (oil, food) – squeezing margins
• Not all bad news:– Scottish oil & gas sector booming– Growing demand for Scottish food and drink (high value products)– Growth among innovative, competitive, customer focused and internationally
focused companies– Opportunities in ‘new’ sectors e.g. renewables– Scotland still very attractive to mobile investors
Scottish and Global Economic Trends – supply chain and logistics implications
• Slower growth – less goods to move?
• Sectoral growth – supply chain/logistics requirements – and opportunities?
– Oil & gas, food & drink, pharmaceuticals – export growth
– ‘new’ sectors e.g. renewables
• Increasing importance of non-EU markets – changing logistics/transport requirements?
• Businesses focusing on cost cutting – logistics and supply chain efficiencies?
• Move to local supply chains – implications?
– quality control
– reduced transport costs (and environmental benefits)
• Rising fuel costs – a short term blip or long term trend?
– transport costs, fossil fuel substitution