As usual at the start of the month we update our latest nowcasts of the economic growth performance of the Scottish economy.
These nowcasts aim to give a more timely indicator of current economic performance than official statistics which are produced with a considerable lag.
In estimating our nowcasts we make use of a wide variety of different data sources, including the latest business surveys and information on Scotland’s labour market.
Our model produces the following estimates for the third (Jul-Sept) and fourth (Oct-Dec) quarters of 2016:
- Our latest nowcast for GVA growth in 2016 Q3 is 0.32% which, at an annual rate, is 1.28%.
- Our first nowcast for GVA growth in 2016 Q4 is 0.37% which, at an annual rate, is 1.50%.
Our results continue to be consistent between Q3 and Q4, but our Q3 estimate has been revised down (again) very slightly from last month. This month’s estimates are the 5th nowcast estimates for Q3.
For the 4th quarter of 2016, this month’s nowcasts, given delays in the release of data, are the first to include data related to Q4 itself. These data were released during November and relate to activity in October. We can see that this has had little effect on our Q4 nowcasts from last month (the very small differences, when rounded to two decimal places, increase the annualised estimate very slightly).
There have been some encouraging signs about the performance of the UK economy in 2016, most obviously the surprisingly strong growth of 0.5% in Q3. The OBR have forecast growth of 2.1% in 2016 (up by 0.1% from their March forecast) while lowering their forecasts for 2017 and 2018.
In Scotland, there remain some mixed signs about the performance of the Scottish economy – although it is certainly the case that the outlook, whilst remaining challenging and uncertain, is slightly more positive than during the summer.
Our latest Fraser of Allander Institute Economic Commentary will be published next Tuesday and will discuss these trends and more.
For now, a few summary points are worth making.
- The new FAI/SCER Scottish Labour Market Trends report provides some reason to be cautious about improvements in headline unemployment numbers as indicating an improvement in the health of the Scottish economy.
- The FAI Autumn Statement briefing showed that the Scottish Government budget is increasing very marginally in real terms next year, although it is worth reiterating that this real terms increase in the budget is only for next year. However, it does mean that at least there is not a further hit to Scottish Government demand.
- The 25th Oil and Gas survey, produced this week by the FAI in partnership with Aberdeen and Grampian Chamber of Commerce, showed that more contractors have reduced both their permanent and contract staff than at any other point in the history of the survey, many firms felt that the rate of job cuts is likely to slow in the coming year.
- Our nowcasts suggests that in the third quarter of 2016 the Scottish economy grew more slowly than the UK as a whole, continuing the recent pattern.
The FAI Commentary released later this month will consider all of these issues in more detail.