Scottish economic bulletin: May 2025

Consumer Activity

The Scottish Consumer Sentiment Indicator fell in March, rounding out a period of weakening sentiment in the first quarter of 2025.

Consumer Sentiment

• The Scottish Consumer Sentiment Indicator reflects how people feel the economy is performing, how secure they feel about their household finances and how relaxed they feel about spending money.
• Consumer sentiment has continued to weaken in the first quarter of 2025 following a period of declining sentiment at the end of last year. In March, the Scottish Consumer Sentiment Indicator fell by 2.3 points to ‑8, its lowest net balance since August 2023.^[17]

• This fall in sentiment was driven by a fall in four of the five sub-indicators of sentiment regarding current and future economic performance, attitudes to spending, and future household financial security. These were partially offset by improving sentiment on current household finances.
• The attitudes to spending and expected economic performance indicators saw the largest falls, month on month, both dropping by 4.5 points to ‑21.8 and ‑1.4 respectively. Sentiment on household finances was the only area of sentiment to have strengthened in March, rising by 2.2 points to ‑7.6, albeit remaining in negative territory.
• Overall, the negative net balances indicate that compared to a year ago, households feel, on balance, that the economy is performing slightly less well, and to a greater extent, and that their household finances are less secure, with similar expectations for the year ahead. This is reflected in the attitute to spending indicator which remains the most negative.

• The recent downward trajectory in consumer sentiment in Scotland is broadly in line with changes in consumer sentiment observed at a UK level, where measures of sentiment declining have been driven by lower sentiment on the economy.^[18]

Spending and Cost of Living

• Households are spending more, as retail sales in Great Britain rose 1.6% in volume terms over the three months to January (2.4% rise in value terms) and rose 1.7% annually (2.2% rise in value terms).^[19]
• Lower and more stable inflation and reductions in interest rates are providing improving conditions for consumption, though the full benefits continue to feed through gradually, and cost of living challenges are continuing to impact households.

• Across the UK as a whole, average direct debit transaction amounts fell 2.27% over the year to April. This is in part driven by falling electricity and gas direct debits, falling from £168.96 in March to £165.95 in April, which represents a 9.3% annual reduction in average transactions of this type. However, average mortgage direct debit transactions have continued to increase, rising to £989.58 (up 7.12% from last year).^[20]

• Direct debit failure rates due to insufficient funds have fallen in the latest data for April, but remain elevated compared to the end of 2024, with total direct debit failure rates down from 2.26% to 2.24%. This fall has been driven by lower failure rates for mortgages and fitness facilities, offset by increased failure rates for electricity and gas direct debits.
• In April, the ONS Public Opinions and Social Trends survey showed that 34% of respondents found it very or somewhat difficult to pay their rent or mortgage, with the same share of respondents saying the same about energy bills.^[21]
• To mitigate the cost of living, households are taking a range of actions, the most commonly reported of which include spending less on non-essentials (reported by 60% of respondents in April), shopping around more (44%), spending less on food shopping and essentials (40%) and using less fuel and energy (40%).
• As the gradual easing of monetary policy feeds through into economic activity, latest Bank of England data for March shows that the effective interest rate on the total stock of mortgages (new and existing) has fallen, from 3.87% in February to 3.84% in March. This is in part driven by the effective interest rate on new mortgages falling from 4.53% to 4.5%. In April, an average 2-year 75% loan-to-value mortgage offered a rate of 4.43%, down from 4.53% in March, suggesting the gradual pass-through of lower interest rates on the economy is resulting in lower mortgage costs for households.