Happy New Year to all our blog readers!
As usual for the start of the month, we’ve put our nowcasting model to work to produce some new estimates of economic growth in Scotland.
Next week, official estimates will be released by the Scottish Government of the growth in the Scottish economy in the third quarter of 2017.
In advance of this, we provide our final estimate for 2017 Q3 growth and an update for 2017 Q4 growth as follows:
- Our nowcast for GVA growth in 2017 Q3 is 0.37% which, at an annual rate, is 1.50%. This is up a little from our estimate last month.
- Our nowcast for GVA growth in 2017 Q4 is 0.35% which, at an annual rate, is 1.42%. This is essentially the same as reported last month.
With new official data released next week we will be able to evaluate the accuracy of our nowcasting model against these new data. Recall that we did some comparisons between our nowcast estimates and official data in last month’s blog.
The latest Fraser Economic Commentary, released in December 2017, provides an in-depth discussion of the outlook for the Scottish economy.
At the start of a big week of news with the Scottish Budget and the first forecasts by the Scottish Fiscal Commission, we’ve run our nowcasting model with the latest official and survey data to estimate current rates of growth in Scotland.
Our model suggest that the disappointing – and well below trend – levels of economic activity experienced over the past couple of years appears to be continuing.
Specifically, our model estimates that:
- GVA growth in 2017Q3 is 0.38% which, at an annual rate, is 1.51%. This is up slightly on last month’s estimate.
- GVA growth in 2017Q4 is 0.35% which, at an annual rate, is 1.40%. This is essentially unchanged from our estimate last month.
FAI nowcasts and official Scottish Government GDP statistics
The chart above shows how our nowcasts since the start of 2014 have performed relative to the first release of Gross Value Added (GVA) from the Scottish Government over this period of twelve quarters (recall that in line with standard practice GVA data are revised in light of additional data being received).
One interesting feature is that our average nowcast over this period is close (+0.45%) to the average initial release of GVA (+0.37%) as indicated by the dashed lines.
The latest Fraser Economic Commentary is released tomorrow, with new forecasts for the Scottish economy through to 2020.
Later on this week the draft Scottish Budget is released, alongside which the Scottish Fiscal Commission will release their first forecasts of Scottish economic growth and the devolved taxes. With weak economic growth in recent times (just 0.1% over the 3-months to June, and over the year around one-third that of the UK) it will be interesting to see the extent to which the Scottish Fiscal Commission foresee this continuing.
It will also be interesting to see what new measures and initiatives are announced in the Budget to help boost the Scottish economy.
Grant Allan & Stuart McIntyre
Fraser of Allander Institute, University of Strathclyde
In this blog we provide an update from our nowcasting model of the Scottish economy. This includes an updated estimate for Q3 of 2017 alongside our first nowcast for 2017 Q4.
Our model estimates:
- GVA growth in 2017 Q3 is 0.32% which, at an annual rate, is 1.28%. On a quarterly growth basis, this is down over percentage points on our estimate of growth in Q3 from last month.
- GVA growth in 2017 Q4 is 0.34% which, at an annual rate, is 1.37%
Our nowcast model results are summarised over time in the figure below. The period of relatively flat growth through much of 2016 is clearly evident. As we have observed before, our model tends to produce estimates which are less volatile than the first release of GVA but which capture the trend rather well as the figure below illustrates.
Economic growth in Scotland has been sluggish for some time, reflected in the official data and in our nowcast estimates; this makes the downward revision to our estimate for 2017 Q3 this quarter (of 0.1 percentage points; from 0.43% last month to 0.32% this month) a particular concern.
This downward revision is driven by the continued weakness of a range of indicators of the health of the Scottish economy. While the labour market remains robust, elsewhere in the economy there are signs of substantial weakening. Not least in retail sales where growth was flat in the third quarter of 2017 was flat (0.0% growth). Other indicators of economic activity, such as business investment, are a further cause for concern for the short-term outlook for Scottish growth.
The next Fraser Economic Commentary will be published in December, and we will delve into these trends in more detail there.
Slightly later than usual, we release our August nowcast results. These are our latest estimates of economic growth in Scotland in Q2 and Q3 of 2017, and show:
GVA growth in 2017 Q2 is estimated to be 0.49% which, at an annual rate, is 1.98%
GVA growth in 2017 Q3 is estimated to be 0.40% which, at an annual rate, is 1.62%
After surprisingly rapid growth of 0.8% in Q1 in Scotland, our nowcast estimates suggest slower growth in Q2 and Q3.
The latest Fraser Economic Commentary highlighted the challenges still facing the Scottish economy and we would reemphasise those. In addition, we note that the UK economy –which had a surprisingly strong 2016- has weakened in recent quarters. This will have an implication for Scottish trade with the rest of the UK and may therefore dampen growth in Scotland through 2017.