THE Scottish economy grew by 0.6 per cent in the third quarter of 2014 as the country hosted the Commonwealth Games and Ryder Cup, but fell behind the pace of broader UK expansion, official figures have shown.

 

Growth in Scotland had been well ahead of that in the UK as a whole in the opening two quarters of last year, at one per cent and 1.1 per cent respectively.

While yesterday's gross domestic product (GDP) figures from the Scottish Government show a material slowing of growth north of the Border in the three months to September, the quarterly expansion rate of 0.6 per cent is still above Scotland's longer-term average.

The UK economy grew by 0.8 per cent in the three months to September. It had expanded by 0.6 per cent in the first quarter of 2014, and by 0.8 per cent in the three months to June.

The latest Scottish Government figures show construction sector output north of the Border surged by 3.2 per cent in the third quarter. This was the construction sector's second consecutive quarter of strong expansion, following an increase in output of 4.3 per cent in the three months to June.

The Scottish Government notes, in the context of the Commonwealth Games and Ryder Cup, that construction of event-related infrastructure is included in this sector's output.

The Scottish services sector grew by 0.6 per cent during the third quarter. This key sector had expanded by one per cent in the three months to June.

As Scotland hosted the Commonwealth Games and Ryder Cup, the accommodation and food services sub-sector achieved growth of 2.8 per cent during the third quarter.

However, the transport, storage and communications sub-sector, which might be expected to benefit from the staging of major events given the large number of people travelling to and from them, contracted by 1.1 per cent during the three months to September.

Scotland's financial and insurance activities sub-sector recorded a 0.7 per cent fall in output during the third quarter.

However, the broader business services and finance category achieved growth of 0.7 per cent.

Scotland's production sector contracted by 0.7 per cent during the third quarter. However, this was the result of a 10 per cent quarter-on-quarter tumble in output of the volatile electricity and gas supply category, with Scotland enjoying lengthy spells of warm weather during the period.

Crucially, the Scottish manufacturing sector achieved growth of 0.9 per cent during the third quarter.

Comparing the third quarter of last year with the same period of 2013, economic output in Scotland was up by three per cent. The corresponding pace of growth in the UK as a whole was 2.6 per cent.

Economist John McLaren, of think-tank Fiscal Affairs Scotland, said of the third-quarter GDP figures: "The economic boost from hosting both the Commonwealth Games and the Ryder Cup was tempered by lower growth elsewhere, and so the overall improvement in the Scottish economy this quarter is less pronounced than seen in the previous two quarters."

Examining the data for signs of an impact on Scotland's economic output from the tumbling oil price, Mr McLaren noted the refined petroleum, chemicals and pharmaceuticals sub-sector had contracted by two per cent in the third quarter. However, he cautioned that the output of this sub-sector tended, like electricity and gas supply, to be "highly erratic".

He added: "The 50 per cent fall in the oil price over the last six months does not yet appear to have affected either onshore output or employment in Scotland, although the latest data applies to quite early in this price-adjustment process."

Liz Cameron, chief executive of Scottish Chambers of Commerce, said of the third-quarter GDP figures: "This rise is in line with our expectations, and mirrors the results of SCC's Quarterly Business Survey that indicated solid growth for the Scottish economy...but to a lesser extent than the excellent growth figures observed in the previous two quarters."

She added: "Scottish businesses still face challenging macroeconomic conditions...and deflation in some of their major export markets in Europe. Coupled with the negative impacts of a sustained fall in the price of Brent crude oil on the oil and gas sector, the Scottish economy is doing well to maintain levels of solid growth."