Shopkeepers’ optimism has improved for the first time in seven years, according to a respected economic study which found signs of the pendulum of recovery “swinging in the right direction”.
The joint quarterly Fraser of Allander Institute and Scottish Chambers of Commerce Business Survey revealed a host of encouraging signs not least retailers’ hopes over the prospect of a boost to consumer spending during the crucial Christmas period.
But it also warned that any signs of recovery were “frail”, and that the disconnection between price and wage rises could yet put pressure on shoppers’ budgets.
The study, which takes in the quarter to the end of September and is keenly-watched by the business community and policy-makers, comes in contrast to Tuesday’s sobering Scottish Retail Consortium figures. They revealed a “reality check” for retailers during September, with the ringing of tills seeing a slowdown in Scotland.
Scottish Chambers chief executive Liz Cameron hailed the first improvement in optimism for retailers since 2006 as a particular highlight, but warned that the recovery may not be safe from outside shocks, such as the continuing dispute over the US budget. She also urged the Scottish Government to conduct a full review of its support mechanisms for all business.
“Now is the time for a comprehensive review across the Scottish Government of all business support provided by the public sector in Scotland, to make certain that Scotland’s EU funding allocation and other public spending is being invested effectively to catalyse and ensure solid Scottish economic growth,” she said.
She said the survey’s evidence of stronger trading, including increased consumer activity and stronger tourism trends, marked “encouraging signs”.
“The manufacturing sector has seen orders rise at the highest rate since 2007, construction respondents reported a rise in investment intentions, and the long-term decline in retail sales ended with retailers reporting increased optimism for the first time since 2006,” Ms Cameron said.
The study also revealed a six-year high in the rate of increase for manufacturing orders, a boost to investment intentions among manufacturers and construction firms, and expectations of higher profits in retail and manufacturing sectors early next year.
But the Chambers chief also warned that economic vulnerability remains, as salary increases fail to keep pace with inflation.
“Importantly, prices and wages remain disconnected and so household incomes continue to be squeezed. This creates risk in reliance on a consumer-driven economy, which is why Government rhetoric about investment and sustainability needs to become a reality to enable continued growth and confidence,” she said.
“Business confidence and future optimism is on the right course and governments must align their policies with businesses to continue this journey of a sustainable recovery.”
She called for more support to help boost Scottish exports, and again appealed for the UK Government to act to abolish air passenger duty as a barrier to growth.