As Chinese and German manufacturing contracts, Scotland maintains modest growth

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By Russell Bruce
Everything is relative and Scotland has a bit to go to catch up with numbers 1 and 2 of the world’s biggest exporting nations.

Commenting on the HSBC China Services Purchasing Managers Index (PMI) about the decline in Chinese manufacturing in November, Markit Economics reported Chinese manufacturers recorded a first monthly reduction in output since July, while service providers saw activity growth ease to a three-month low.

By Russell Bruce
Everything is relative and Scotland has a bit to go to catch up with numbers 1 and 2 of the world’s biggest exporting nations.

Commenting on the HSBC China Services Purchasing Managers Index (PMI) about the decline in Chinese manufacturing in November, Markit Economics reported Chinese manufacturers recorded a first monthly reduction in output since July, while service providers saw activity growth ease to a three-month low.

Hongbin Qu, Chief Economist, China at HSBC said:

“With price pressures easing further, Beijing can and should use policies that are targeted on small businesses and service sectors to keep GDP growth at above 8% for the coming year.”

Markit Economic’s German Manufacturing PMI report noted “November data highlighted a continued reversal of fortunes in the German manufacturing sector, with weakening export conditions resulting in the fastest drop in output and new orders since mid-2009. Intermediate and investment goods producers were the hardest hit in November.

Comparing Scottish manufacturing growth with the position in China and Germany only offers limited conclusions to be drawn but that Scotland is still in growth is of some significance in the face of global contraction and economic uncertainties.

The Bank of Scotland’s latest PMI report registered 51.1 in the combined manufacturing and service analysis of growth activity, chalking up 11 months of successive growth and outpacing the UK as a whole, albeit marginally.

A figure above 50 in these reports represents growth and a figure below 50 signals contraction.

Speaking about this latest report on the Scottish economy’s continuing relative strength, Donald MacRae, Chief Economist at Bank of Scotland, said:

“November’s PMI was positive for the 11th month of this year suggesting the private sector of the Scottish economy continues to grow across manufacturing and services. Both new orders and new export orders fell in the month highlighting the challenge of maintaining growth in the face of the global slowdown. The November PMI at 51.1 is above both the UK and the Eurozone showing the resilience of the Scottish economy.”

Given that the Eurozone and its currency resolution continues to hog headlines and columns of economic comment I have added a few other  Eurozone countries to a graph of manufacturing output in a comparison with Scotland and China, to illustrate Scotland’s comparative positive strength.

Speaking about Europe, I have been reading the columns of many of the UK’s illustrious economy commentators on David Cameron stomping out of EU negotiations. The language is rather forthright. I will constrain myself and simply refer to his behaviour and arch sooking up to his right wing as crass incompetence.

As others have noted, however much Margaret Thatcher jumped up and down about Europe she never, never left the table or the UK’s seat vacant.

Cameron slapped his veto on the table and walked out leaving senior Foreign Office officials furious and impotent to deal with the UK and Scotland’s interests in Europe.

Why does the EU matter so much in trade terms? Officially the US is the world’s largest economy with a GDP of 15,227 billion dollars. Collectively the 27 countries in the EU have a combined GDP of 16,907 billion dollars.

That makes the EU economy 11% larger than that of the US, which puts the scale of Europe’s economy in a context that is not widely acknowledged.

While Cameron was getting pats on the back from his anti European dinner party chums. Even the bankers, he has made such a play to defend with the line he drew in the sand, are looking worried.

George Osborne should be worried too. The coalition is creaking. The LibDems are revolting (sic).

There are lots of reasons to stay at the table and Cameron was completely out manoeuvred by Sarkosy who knew Cameron’s demands for City (London) advantage would find no other supporters.

26 to 1 was a stunning political victory for Sarkosy whose dismissive wave of the hand saw Cameron stomp off in ineffectual retreat.

The implications for Scotland are immense and they are not good for the City of London either. Much of Europe’s financial trading is handled from London and Cameron has put that at risk.

Inward investment in Scotland, which the present SNP government has an impressive track record on, is also at risk because part of the calculation by companies choosing Scotland is that we are part of Europe and the EU as the largest combined economy in the world is an open door with a Scottish presence.

What about George Osborne’s boast that the low interest rate the UK enjoys on its debt mountain is because of his competence in economic policy?

Cameron has just jeopardized that also. His use of the veto was made without consideration that UK debt and the fiscal deficit are worse than those of Italy and Spain.

It will be interesting, if not terrifying, if the markets make a reassessment of the new risk cost of Britain’s debt.

Hot off the plane from his successful trip to China. Alex Salmond has wasted no time in expressing his concerns about the implications for Scotland’s economy to David Cameron who in reality was vetoed by the rest of Europe.

Heading the list of six key questions, in a strongly worded letter, First Minister, Alex Salmond has asked David Cameron

“What risk assessment, if any, did the UK government undertake of the likely impact of its veto decision on investment into Scotland and the UK, and on negotiations affecting key Scottish industries such as agriculture, fishing, and financial services – where qualified majority voting already applies?”