Consumers still wary as recovery tipped to slow down

Economic recovery in Scotland is expected to slow down against "looming headwinds", according to a new study.

Recovery peaked in July but is due to slow in the final three months of this year, according to the Bank of Scotland's Index of Economic Indicators report.

The report looks at 16 indicators of the financial health of Scotland, including consumer confidence, new car registration and demand for staff.

It found low consumer confidence, with Scots unwilling to buy so-called "big ticket" items such as cars or white goods. It also suggested historically low interest rates had yet to kick-start a fresh wave of housebuilding activity, putting more pressure on the construction sector.

Scottish consumer confidence remained in negative territory in July - the fifth month in a row. UK consumer confidence is also

The Scottish Motor Trade Association reported a second straight fall in the number of new car registrations during July. New car sales were 9.5 per cent lower than in the same month last year, following a 6 per cent drop in May.

But the low inter-bank lending rate, a rise in new orders and increased demand for staff indicate growth is "reduced but not extinguished". Donald McRae, chief economist at the bank, said: "This latest update shows the tentative recovery slowing in autumn as both consumer and business confidence continue to be dented by widespread concerns over the effect on jobs and contracts of future cuts in government spending."