March Scottish Nowcast update

Economic forecasting and nowcasting is notoriously difficult – even more so in a period of heightened economic uncertainty.

With the 29th March looming large on the calendar, economic uncertainty at present is extraordinarily high.

With this in mind, we report the latest results from our nowcasting model for Scotland.

Our nowcast for GVA growth in 2018 Q4 is 0.29% which, at an annual rate, is 1.16%

Our nowcast for GVA growth in 2019 Q1 is 0.31% which, at an annual rate, is 1.24%

These estimates are consistent with the economic narrative developing in the UK, but also in Scotland, of businesses continuing to trade in a ‘business as usual’ manner, but holding off on the sorts of investment decisions which might produce growth at or above long-term trend growth.

This is partly reflected in the early measures of activity provided by business survey indicators, which we use in our model. The PMI for January showed activity declining in Scotland (as well as other places like London) in the first month of the year.

Official data on Scottish growth in 2018 Q4 will be released on the 20th of March, for comparison UK growth in Q4 came in at 0.2%, representing weak and below trend growth. Scotland had grown ahead of the UK in the first half of 2018, but data for the summer was much weaker with Scotland lagging the UK once more.

We will have to wait until sometime in June for official estimates of growth in Q1 2019 in Scotland.

Estimates for the whole of the UK will be released in May, and should the UK exit the EU without a deal on 29th March – all eyes will be on the early indicators of activity in the economy to assess the impact.


October nowcast of the Scottish economy

Recent economic news on the Scottish economy has struck a slightly more upbeat note about the current pace of economic growth.

This comes on the back of growth over the year to June 2018 – whilst still below average – at its fastest since late 2014/early 2015 and the Scottish economy outpacing the UK for the last two quarters.

While, as set out in our latest Fraser Economic Commentary we remain cautiously optimistic, growth is likely to remain below trend for the duration of our forecast horizon. And overall, the immediate outlook for Scotland’s economy remains highly uncertain.

Against this backdrop, the latest nowcasts of economic growth in Scotland from our nowcasting model have been generated.

Our nowcasting model combines the latest data on a range of indicators, including official data such as unemployment, alongside a range of ‘soft’ indicators of activity like consumer confidence indicators and our own business surveys.

This month the model estimates growth in 2018 Q3 of 0.40%, which, at an annual rate, is 1.61%.

While still below trend, this estimate suggests that growth in Q3 is continuing to tick back up after a couple of years of weak growth.

Survey evidence showing that the outcome of the ongoing Brexit negotiations weighs heavily on businesses. While the recent rise in economic growth is to be welcomed, this incremental improvement could be easily undermined by a failure to agree a Brexit deal.

July 2016 Nowcasts

Today (29th June 2016) we release our latest series of nowcasts of the Scottish economy; these are our final estimate of growth in 2016 Q1 and our latest estimate for 2016 Q2 [1].


  • 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.28%, the quarterly change is nowcast to be 0.32%
  • 2016 Q2 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.52%, the quarterly change is nowcast to be 0.38%

These nowcasts represent a slight upward revision to our nowcasts for 2016 Q1 and Q2.

Despite including data made available during June 2016, these nowcasts are produced using data relating to the economy prior to the EU Referendum result. Thus, while for continuity we release these nowcasts, our expectation is that our future nowcasts, and indeed realisations of Scottish and UK GDP, for 2016 will be lower than those forecast prior to the result of the EU referendum result.

It is likely that the significant uncertainty evident since the announcement of the referendum result will have a negative effect in the short run as business and consumer confidence weakens leading to possible investment decisions either being delayed or cancelled. The increased uncertainty will likely act as a drag on inward investment, and potentially a stalling of other investment decisions, until after the uncertainty about the UK’s position with regards to its future trading arrangement with the EU and other markets is resolved.

That being said, no change to the UK and Scotland’s trading arrangements or labour market status will be confirmed, according to the UK Government, for some time (over two years by some estimates), although continued uncertainty about the future shape that these will take will raise significant challenges for the Scottish and UK economies as the unprecedented process of leaving the EU proceeds in the coming weeks and month.

Against this, the abrupt and sharp weakening of the pound against major currencies seen since the result was announced could make Scottish products more competitive overseas. But previous such periods suggest that there is a question over the price-responsiveness of Scottish exports (and Scotland’s major export markets are seeing their own forecasts revised down). Further, Scottish firms and consumers will see prices rise for imported goods, as these become relatively more expensive.

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.