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.