Terrible, isn't it, the economy ... Why, only yesterday I was reading that more than a third of small firms will be shutting their doors for more than a week over the Christmas period - double the number for last year. Doesn't it prove things are not getting any better, they're just getting worse?But there's another interpretation. It shows more business owners are happy to take a longer break and more confident about taking time off to catch up with paperwork, or simply relax with their families.However, economics is not called the dismal science for nothing. No sooner is an upswing underway - figures yesterday showed unemployment in Scotland down by another 7,000 and numbers in work up 83,000 over the year to 2.54 million - than the worry beads start clicking about capacity overload, skills shortages, inflation, higher interest rates and slowdown. And it is my sad duty to report that this will be exactly the pattern we will follow in 2014: a recovery of such resonance and strength as to turn good news into bad as the year progresses.We are pleasantly surprised, of course, that there is a recovery at all. This time last year very few practitioners of the dismal science were forecasting an upturn of any real strength. Even the Office of Budget Responsibility failed to predict the economy with any useful accuracy. Our own Fraser of Allander Institute was obliged to raise its forecasts twice, and even today is predicting a miserly growth out-turn for Scotland . It has raised its latest forecast from 0.9 per cent to 1.3 per cent, and for 2014 from 1.6 per cent to 1.8 per cent. Talk about grudging. Given the spate of improving data on employment, retail sales, mortgage lending and consumer and business confidence, this is equivalent to pulling teeth.Today we have good reason to believe the upturn will continue into the new year - five good reasons, in fact, before bringing in their train much for economists to be dismal about.First, the five loaves of good news that should feed the recovery story as we enter 2014.The latest CBI industrial trends survey for December out this week brings notably good news on the manufacturing front. Output growth over the three months to December equalled the November performance, itself the strongest since January 1995 . No less than 14 out of 16 sectors reported expansion. Particularly encouraging is that the total orders climbed further to a near 19-year high in December, with export orders at a 22-month high.Second, we have seen a markedly upbeat survey in the past week from the Federation of Small Businesses . For the fourth consecutive quarter, the Small Business Index measure of confidence among small firms has grown year-on-year, up 27.2 points from minus 5.6 this time a year ago to plus 21.6 . This optimism is also replicated in every region of the UK and in each business sector.A third reason for confidence is that the latest Bank of Scotland Report on Jobs out this week signalled a sharp increases in both permanent and temporary staff appointments in November. Scottish recruiters largely linked this to greater demand, with vacancies rising at the fastest rates for more than six years. Meanwhile, permanent salaries continued to rise strongly, albeit at the slowest pace since August. Edinburgh -based recruiters reported the strongest increase in permanent placements, while Glasgow posted the fastest rise in temp billings for the second month running.Fourth, a new survey from the CBI and business consultancy firm Accenture finds that more companies expect to create jobs than not over the next 12 months for the first time since the onset of the recession in 2008.The survey covered businesses employing more than one million people between them. It found that more than half of firms expect their workforce to be larger in 12 months' time, with private sector workforces anticipated to grow across all regions. Encouragingly, there are also an increasing number of opportunities for young people to find work, with companies planning to take on more graduates and apprentices.Says Katja Hall , CBI chief policy director, "We're starting to see the recovery have an impact on business plans to hire ... It's good to see jobs being created across most regions, not just London and the South-east."Last but by no means least, latest figures show entrepreneurs across the UK have launched a record 500,000 new businesses in 2013. Research from the national StartUp Britain enterprise campaign shows 502,068 businesses have been created, putting the campaign on course to hit 523,410 by the end of the year.Scotland is also enjoying an increase, though not as marked as that south of the Border. The total number of businesses in Scotland hit a record 343,000 in the year to end March. Of this total, 341,000 or 99 per cent comprise small and medium sized businesses (SMEs). These now employ 1.1 million people in Scotland . Enterprise minister Fergus Ewing has done much to encourage start- ups. The biggest element of growth - 73 per cent of the increase in the year to March - was in the ranks of sole traders and unregistered businesses.Will the independence referendum have an impact on Scotland's economic performance next year? At the macro level I doubt it. Our GDP performance tends to track that of the UK closely. And as the lion's share of our exports goes to the rest of the UK , we should continue to enjoy stronger demand from this source. However, the business apprehension level will start to rise before long should the prospect of a "Yes" vote intensify. Businesses will be scrambling to prepare a "Plan B".Overall, I believe growth in 2014 will be nearer to three per cent than the 2.4 per cent forecast by the OBR, bringing with it higher employment, stronger domestic demand and, in due course, a rise in average earnings.But it is just this prospect that is set to bring the practitioners of the dismal science to the fore. I expect that by the end of next year the focus of policy concern will be on overheating - and the need for a change in interest rates. A fall in unemployment from today's UK level of 7.4 per cent to 7 per cent - the Bank of England trigger point for a rise in rates - is already within sight. This is likely to bring volatility to financial markets that could cool that long-awaited upturn in business investment. The worry is that once interest rates change, we could see a series of rises, taking official rates up to 4 per cent before long.So 2014 may prove the strongest year in the recovery story. It carries the seeds of its own slowdown. But for the moment we should enjoy the upturn - and the better times, higher employment and greater confidence it will bring.
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