George Kerevan: Scotland is not immune as global picture grows bleaker

By contrast, UK manufacturing output has contracted for the first time since 2009, following a sharp decline in export orders. The respected Markit purchasing managers’ index dropped to 49 in August – a 26-month low (anything below 50 means contraction).

New manufacturing orders also fell in every one of the 17 countries of the eurozone. Alarmingly, German export orders fell fastest. The same pattern emerged in Asia, where purchasing managers indices in South Korea and Taiwan dipped below 50.

Are the optimistic Scottish figures to be believed? The survey counts around 150 of Scottish Engineering’s 400 members – a reasonable sample, though it could be bigger. The most obvious caveat is that the survey covers the second quarter of 2011, while the contraction in global manufacturing stems from August. Over the summer, consumer spending has weakened in Europe and America, while China has applied the brakes to its over-heating domestic economy.

This points to a less positive picture for Scottish manufacturing when the Q3 results are published. Buried in the small print of the latest survey is the information that medium-sized and large engineering companies in Scotland are predicting a broadly negative trend for export orders over the next three quarters.

That said, we shouldn’t denigrate the recent performance of Scottish engineering. The jump in unemployment in Scotland at the onset of the 2008 recession – relatively bigger than in England – suggests a ruthlessness in cutting costs that has stood Scottish manufacturing well when it comes to securing orders.

Staying optimistic, Scottish engineering is also cushioned from the uncertainties of global demand by the North Sea oil industry, and by the two huge Royal Navy aircraft carriers being built on the Clyde and assembled at Rosyth.

However, the bottom line is that Scottish engineering is not yet the motor of recovery. The latest (Q1) data for all Scottish exports shows strong growth of 3.9 per cent. But most of that – 3.3 percentage points – came from food and drink, and from chemicals and petroleum products.

In February, the SNP government launched a Scottish Loan Fund for SMEs “preferably in an export market”. According to Paul Provan, of the Institute of Chartered Accountants of Scotland, by June the fund had received around 120 inquiries, but only four offers of cash had been made.

A third of inquiries were rejected as not meeting the fund’s criteria. This speaks to confusion as to what the fund is about, or desperation on the part of firms seeking finance. Either way, our exporting SMEs still need help.

Obama’s among those in US worried about his job

ONE economy that did buck the summer downturn in manufacturing was, curiously, America – though only by a whisker. However, the latest US job figures, published yesterday, suggest this is the calm before the storm. In August, the American economy created (net) precisely zero new jobs. It needs an increase of 125,000 per month just to keep unemployment at the current (disastrous) 9.1 per cent, and 200,000 every month for a year to get the jobless total down a measly one point.

The latest US payroll figures were even worse than expected – with a corresponding negative impact on global markets. The US economy has recovered less than two million of the 8.75 million jobs it lost during the recession.

The cause: stagnant wages and a still-depressed housing market are making American consumers unwilling to spend.

On top of that, last month’s absurd wrangle between ideological Republicans and Democrats that took the US federal government to the brink of default did not encourage firms to risk hiring more workers.

There is one other job on the line – President Obama’s. Past history suggests that no post-Second World War president has won re-election when the US unemployment rate was above 7.2 per cent.

On today’s figures, it is likely to remain above that till the election.