November 2015 Scottish Economy Nowcasts

Today (2nd November) we release our latest series of nowcasts of the Scottish economy; these are our revised estimate of the growth in 2015 Q3 and our first estimates for 2015 Q4 [1].

Headlines:

  • 2015 Q3 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.33%, the quarterly change is nowcast to be 0.33%
  • 2015 Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.71%, the quarterly change is nowcast to be 0.43%

These nowcasts represent a downward revision for 2015 Q3, and our first indication of economic activity in Scotland in Q4 2015.

We have noted in a number of our recent monthly updates that economic performance in Scotland has been disappointing through 2015, and while we are still finding positive growth in the Scottish economy through the third and fourth quarters, this is now considerably below long-term growth rates.  

In October we received official estimates of Scottish GDP for Q2 2015. These suggested that growth in Q2 2015 in Scotland was 0.1%. This is significantly lower than any of our nowcasts for Q2, and given that the underlying indicators for Q2 did not suggest such a significant drop, this substantial downward step in economic growth was a surprise to us. With the release of these new GDP data for Scotland, there was also a revision of the GDP series which lowered the official estimate for 2015 Q1 and 2014 Q4. We will shortly post a nowcast evaluation based on these new data.

Last week UK growth estimates for 2015 Q3 were released, and while reported growth of 0.5% was disappointing relative to expectations of 0.6-0.7%, it is significantly higher than the growth rate we are seeing in Scotland for Q2. What growth we did see in Scotland in 2015 Q2 was driven by growth in the construction sector with no growth in services and production activity contracting, whereas in 2015 Q3 in the UK as a whole, interestingly, we saw the construction and manufacturing sectors contracting and the services sector showing good growth.

These estimates for 2015 Q2 for Scotland are very worrying, with the economy on the verge of contracting in that quarter. That being said, what we are seeing in the raw data and finding in our nowcasts suggest somewhat stronger growth, if still very disappointing relative to long-term trend growth. Nevertheless, we are seeing a consistently weaker performance of the Scottish economy compared to the UK as a whole, and the lack of growth in the services sector in Scotland is an area of particular concern given ongoing issues affecting the manufacturing and production sectors (e.g. high input prices, China slowdown, European economic weakness, etc).  

Our next set of nowcasts, which will be produced using data released during November and relating to October (the first month of Q4) and hence the first data we will receive which relate to Q4 itself, will be instructive in terms of the path of economic growth in Scotland in Q4. Better performance through Q4 may well offset the reported lack of growth in Q2, and the underlying indicators are supportive of continued, if weak, growth in Scotland through 2015.

For details of how the data mentioned above, and other “live” data on Scottish economic activity are used to construct our “nowcasts”, see the Methodology page.


[1] 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.

Advertisements