Today (1st February 2016) we release our latest series of nowcasts of the Scottish economy; these are our revised estimate of the growth in 2015 Q4 and our first estimates for 2016 Q1 .
- 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.52%, the quarterly change is nowcast to be 0.38%
- 2015 Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.38%, the quarterly change is nowcast to be 0.34%
These nowcasts represent a downward revision for 2015 Q4, and our first indication of economic activity in Scotland in Q1 2016.
The estimate of Q4 2015 economic growth is down 0.07% (0.21% on an annualised basis), a notable decline given that, for the predictors we use, these nowcasts are now using all of the data that will be released relating to Q4 itself.
It is worth pointing out that our nowcasts for Q2 and Q3 of 2015 were more optimistic than the first official release of GDP from the Scottish Government, which found that the Scottish economy only grew by 0.1% in Q2 and Q3, versus our 4th nowcast (based on all the information on the quarter being available) of 0.54% and 0.33% respectively.
This further weakening of our own estimates of economic growth in Scotland raises the prospect that the Scottish economy may have contracted in Q4 of 2015.
Q4 is a traditionally difficult quarter to predict given the role of bad weather, and associated travel disruption, and the festive period generally, on the economy. In Scotland in 2015 Q4 we can add to this the impact of the Forth Road Crossing being closed. With this in mind, our next set of nowcasts, which will be produced using data released during February and relating to January (the first month of Q1) and hence the first data we will receive which relate to Q1 itself, will be very interesting in helping us to understand the growth path of the Scottish economy at the start of 2016.
We highlighted a number of factors which will be central to the performance of the Scottish economy in 2016 in our end of year review post. The continuing impact of low Oil prices on the economy of the North East of Scotland (the City-Region Deal for the North East announced last week is great news in this regard), and continued weak export demand (here Scotland is helped by demand from rUK, but overseas export demand is still weakening) are combining to undermine economic growth in Scotland.
UK GDP estimates for Q4 2015 were released last week and showed growth of 0.5% (or 2% on an annualised basis). This is solid growth around trend levels. It is also far higher than what we are seeing in Scotland at the moment. If current trends in Scottish GDP growth continue, we may well see the economy shrink in the near future.
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.
 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.