We have been nowcasting growth in the final quarter of 2014 since November 2014. The first official estimates of Scottish GDP for 2014 Q4 have just been released by the Scottish Government.
We can now assess how accurate our released nowcasts for this quarter have been. The official release puts growth in the Scottish economy in the last quarter of 2014 at 0.6% (or 2.4% at an annualised rate).
Based on our 5 nowcasts, we therefore have a average absolute nowcasting error (AANE (explained in more detail below)) of 0.07 percentage points for the quarterly growth estimate, which gives an AANE of 0.27 percentage points based on the annualised estimates.
It is often difficult to put these error evaluations into a proper and understandable context, and so while it is not a perfect reference point for our AANE, we provide at least as an initial one based on work by the Office of Budget Responsibility (OBR).
The OBR released an evaluation of their UK GDP forecasts in October 2014. This showed (p92) that the average absolute forecast error for the OBR’s Q4 in-year forecasts (reported between 2010 and 2013) for annual GDP growth was 0.475. For our 2014Q4 nowcast we have an absolute error of 0.27 on our annualised growth estimates, suggesting that our model is performing well.
We produced 5 nowcasts for 2014 Q4 with estimates (identified by month of release, with links to the blog post) of:
Which at an annualised rate, gives estimates of:
Average absolute nowcast error (AANE) is calculated as the average of the absolute differences between each of our nowcasts and the realised value for Scottish GDP for that quarter.
Today (2nd April 2015) we release our third GDP nowcast estimates for 2015 Q1 and final estimate for 2014 Q4 .
In general, the picture is of a growing Scottish economy, however the rate of growth appears to have slowed as we end the first Quarter of 2015 from that nowcast for the final quarter of 2014. The decline in oil prices, while garnering much attention, and perhaps explaining some of the dip in economic indicators in January, does not appear to be impeding economic growth (subject to all the usual caveats). A useful discussion of the impact of oil price decline on the Scottish economy can be found in the most recent Fraser Economic Commentary (available here).
- 2015Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.29%, the quarterly change is nowcast to be 0.57%
- 2014Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.77%, the quarterly change is nowcast to be 0.68%
Our estimates for both 2015 Q1 and 2014 Q4 are similar to those obtained last month.
Last month our estimate of GDP growth in Scotland in Q1 2015 was (at an annualised rate) 2.21%, compared to a slight increase to 2.29% this month. Similarly we revise up slightly our estimate for 2014 Q4 from 2.65% to 2.77%.
The next GDP figures for Scotland are due out this month and relate to Q4 2014. We look forward to comparing our nowcasts to the official data. For reference, we have nowcast growth in Q4 2014 on five occasions now; our average nowcast estimate for 2014 Q4 is 2.71%, with a range of 2.59-2.81%.
Examples of new information received this month, and included in our new estimate for Q1 2015 and Q4 2014include:
- Bank of Scotland PMI Scotland  improved from January and now shows (some) growth in economic activity.
- Northern Ireland PMI, which recall was previously shown to be useful in predicting Scottish economic activity, declined for the third successive month.
- For all other regions of the UK, PMI reflected economic expansion.
- The claimant count measure of unemployment in Scotland continued its 44 month decline, falling to 2.9% this month.
For details of how these, and other “live” data on Scottish economic activity are used to construct “nowcasts”, see the Methodology page.
 Note as explained in the methodological paper (here), we nowcast gross value added (GVA) rather than gross domestic product (GDP), because this is the regional equivalent of GDP which is produced, but we refer here to GDP for intuitive ease.
 Bank of Scotland PMI Scotland are reported by Lloyds Banking Group here.