April nowcast update

With 29th of March now behind us, but with the uncertainty remaining rather than resolved, we have produced a new nowcast for the Scottish economy for Q1 2019.

Since our last nowcast in early March we have received official estimates of GDP growth in 2018 Q4. These place growth in Q4 at +0.3%, slightly ahead of UK growth in Q4 of 0.2%.

This is in line with our last nowcast for Q4 2018 which put growth at 0.29%.

Services growth again outpaced the overall economy with growth of 0.5% in Q4 of 2018, but production sector growth was down -0.9% for the second quarter in a row.

These latest official data put overall growth in Scotland in 2018 at 1.4%, still significantly below long-run trend growth.

Turning to growth in Q1 2019, our latest estimate puts growth at 0.31%, or at an annualised rate 1.26%.

One reason for this is that consumer and business confidence remains low.

We will set out some scenarios for different Brexit scenarios in the next Fraser Economic Commentary.

These will consider how any resolution to the political and economic uncertainty around Brexit – and any likely policy response – might impact on economic outcomes over the forecast horizon.

We will continue to produce monthly nowcasts to seek to identify any movements in quarterly growth rates.

 

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March Scottish Nowcast update

Economic forecasting and nowcasting is notoriously difficult – even more so in a period of heightened economic uncertainty.

With the 29th March looming large on the calendar, economic uncertainty at present is extraordinarily high.

With this in mind, we report the latest results from our nowcasting model for Scotland.

Our nowcast for GVA growth in 2018 Q4 is 0.29% which, at an annual rate, is 1.16%

Our nowcast for GVA growth in 2019 Q1 is 0.31% which, at an annual rate, is 1.24%

These estimates are consistent with the economic narrative developing in the UK, but also in Scotland, of businesses continuing to trade in a ‘business as usual’ manner, but holding off on the sorts of investment decisions which might produce growth at or above long-term trend growth.

This is partly reflected in the early measures of activity provided by business survey indicators, which we use in our model. The PMI for January showed activity declining in Scotland (as well as other places like London) in the first month of the year.

Official data on Scottish growth in 2018 Q4 will be released on the 20th of March, for comparison UK growth in Q4 came in at 0.2%, representing weak and below trend growth. Scotland had grown ahead of the UK in the first half of 2018, but data for the summer was much weaker with Scotland lagging the UK once more.

We will have to wait until sometime in June for official estimates of growth in Q1 2019 in Scotland.

Estimates for the whole of the UK will be released in May, and should the UK exit the EU without a deal on 29th March – all eyes will be on the early indicators of activity in the economy to assess the impact.

February nowcasts of the Scottish economy…

Apologies for the late release of this nowcast update.

We held off producing a February nowcast update as we awaited information on Consumer Confidence. However as we reach the halfway point in the month, we must push on without this indicator in the model.

The latest official estimates of GDP growth for Scotland cover 2018 Q3. These estimate growth of 0.2%.

Our model suggests that growth remains weak in Scotland.

Our latest nowcasts is that the Scottish economy grew by a below trend 0.31% (albeit slightly above the UK – which was 0.2%) in Q4 2018. At an annualised rate this is 1.24%.

Growth in 2019 Q1 is expected to be similarly weak with a nowcast estimate of 0.33%, which at an annual rate is 1.31%.

The next month or so will be a critical period for the UK and Scottish economy as we head towards 29th March 2019. Perhaps by the time of our next nowcast in a couple of weeks we will have a clearer idea of the economic landscape post March 29th.

January Nowcasts of the Scottish Economy

Just before Christmas the latest estimates of GDP growth in Scotland, covering the 3rd quarter of 2018, were released by the Scottish Government.

These data showed that growth in Scotland in Q3 was 0.3%, half the rate of the UK over the same period.

This represented a slowing of growth in Scotland relative to the previous quarter (in which growth was 0.5%).

Our latest nowcast for the Scottish economy covers the final quarter of 2018, and these suggest that growth in 2018 Q4 was 0.36% which, at an annual rate, is 1.46%. This is broadly in line with growth in the previous quarter.

The shape of economic growth in the UK and Scotland in the first three months of 2019 will of course be shaped by preparations and the resolution of the current uncertainty around Brexit. Nevertheless, we will provide an initial update in early February with our model predictions for growth in Q1 2019.