Scottish economy shrinks further

Scottish bank notes The new figures show the Scottish economy shrank by 0.4% in the three months to June

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The Scottish economy faced a deeper recession in the first half of this year than previously thought, according to new figures.

Scottish government statistics showed output fell by 0.2% in the first quarter of the year, revised down from the previous estimate of -0.1%.

New figures for April to June show a 0.4% fall - the same level of decline as the UK as a whole.

Growth has been flat, taken over four quarters from the middle of last year.

Figures from the chief statistician indicated that the services sector grew by 0.2% in the second quarter.

But total output in the production sector fell by 3.8% following growth of 1.2% in the previous three months.

The largest contribution to the fall in total GDP was from the electricity and gas sector, which fell by 15.1% in the latest quarter.

This fall was partially offset by overall growth in both the services and construction sectors.

The second dip of recession hadn't looked so bad in Scotland.

When last we looked, the last quarter of 2011 and the first quarter of 2012 saw the economy only contract very slightly, and only then because of a deep decline in construction.

But while the UK figures have been revised upwards, meaning they look less bad, the Scottish figure for January to March has been revised down, and the new figure for April to June, contracting by 0.4%, is level with the revised UK figure.

Taken over the year, June to June, that means no growth at all in the Scottish economy, whereas the UK figure was at 0.4% due to strong figures last autumn.

While construction explained much of the downturn, it had a better spring and showed growth.

The poor performer this time was in electricity and gas, down by 15%.

That doesn't include the output from offshore fields, which has also fallen sharply, but which is accounted separately.

It may reflect the volatility of output from the growing stock of wind turbines.

Manufacturing output fell by 2.2%, dragged down by negative growth in textiles, leather and clothing (-3.8%).

Construction output grew by 2% in the second quarter but on an annual basis has fallen by 10.0%.

Deputy First Minister Nicola Sturgeon said the latest economic indicators demonstrated "more than ever" the need for Scotland to have all the economic powers needed to deliver recovery, and urged the UK government to take action on jobs and growth.

"Today's figures show once again that Scotland is suffering under the UK government's do-nothing economic policy," she commented.

"Even without the full economic powers of an independent nation and in the face of Westminster's cuts, this government is doing everything it can to stimulate Scotland's economy and protect families, businesses and front line services."

She added: "In contrast to the UK Government, we have set out in Scotland's draft budget further investment in construction, skills and the green economy."

CBI Scotland reiterated its concerns about the state of Scotland's economy following the release of the figures.

Director Iain McMillan said: "The data published today shows that Scotland's economy was still stuck in recession in the second quarter of this year.

"And we are currently seeing unemployment continuing to rise, albeit with the claimant count coming down.

"Of course, Scotland's economy is suffering from the ripple effects of wider economic difficulties in the EU and further afield.

"But this shows, once again, that the UK and Scottish governments need to devote their entire energies to putting in place those policies that will lift our economy and get people back into work."

'Long way to go'

The Scottish Building Federation said there was "still a very long way to go" towards recovery in the construction industry.

Chief Executive Michael Levack said: "Whilst these statistics may suggest some signs of modest short-term growth in the construction sector during the second three months of 2012, politicians must be extremely wary of drawing any long-term conclusions from the figures.

"The fact remains that the industry has shrunk by 10% over the past year so there's still a very long way to go before we can consider ourselves to be in recovery mode."

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