Output remains above the pre-pandemic level of February 2020, by 0.5%. This indicates a slight increase in growth in Quarter 4 so far, after GDP fell by 0.2% in 2022 Quarter 3 (July to September).

Output in the services sector, which accounts for around three quarters of the economy, increased by 0.3% in October. Output in agriculture, forestry and fishing, construction and production increased by 0.6%.

Meanwhile UK-wide GDP has dropped 0.3% for Q3, according to the latest figures from the Office for National Statistics (ONS), and the economy is estimated to have been at 0.8% below its pre-pandemic level in Q3.

Kevin Brown, savings specialist at Scottish Friendly, commented: “Scotland’s GDP recovered somewhat in October after a difficult previous month. This is perhaps a happy surprise for the Scottish economy as it looks to buck the wider UK and global economic outlook, but it won’t help the pressure piled on by inflation.

“Resilient GDP will be good for jobs, but as we’ve seen this will cause the monetary policy committee to keep the pressure on with rate hikes, as inflation persists at record levels. Cost pressures are hurting Scottish households right now, and this will only begin to feel worse as rates bite down, prices keep rising and wages fail to keep pace.

“So, what can Scottish households do with such a difficult outlook? It may seem hard, if not impossible for many, but continuing to build up financial resiliency wherever possible could be the best way to limit the damage of any future financial shocks. Making even small investments, from as little as £19 a month, could potentially lead to growth over the long term.”

Martin Beck, chief economic advisor to the EY ITEM Club, said: “Q3’s national accounts presented a gloomier picture for GDP than the ONS’ preliminary estimate. The economy is now thought to have shrunk 0.3% quarter-on-quarter, revised bigger from 0.2%, and there were downward revisions to the change in GDP in each quarter from Q3 2021.”

Mr Beck continued: “The economy’s weakness in Q3 reflected a 0.5% fall in real household incomes – the fourth consecutive quarterly decline. However, an unexpected headwind came from a surprise rise in the household saving ratio, which increased to 9% from 6.7% in Q2, breaking the downward trend from a pandemic-related peak of 20.1% at the start of 2021.

“Granted, much of the rise reflected a change in pension entitlements related to the rise in gilt yields over the autumn. But the non-pension saving ratio also ticked up. Meanwhile, Q3’s current account deficit of 3.1% of GDP was substantially narrower than Q2’s 7.1%, although movements in non-monetary gold made a large contribution to the smaller shortfall.

He concluded: “Q3’s fall in GDP is unlikely to prove a one-off. Retail weakness, a poor set of PMIs and disruption from industrial action all point to the economy likely contracting again in Q4. And the EY ITEM Club expects a recession to persist over the first half of 2023, as high inflation affects household spending power and tighter monetary and fiscal policy weigh on activity.

“That said, the economy is not out of supports. Households have room to save a smaller share of incomes, and on some measures, they have yet to dip into the £200bn+ of excess savings accumulated during the Covid pandemic. Consumer spending is therefore unlikely to fall to the same extent as real incomes. And falling inflation over the course of next year offers hope of a return to growth later in 2023.