April 2016 Scottish Economy Nowcasts

Today (1st April 2016) we release our latest series of nowcasts of the Scottish economy; these are our revised estimate of the growth in 2015 Q4 and 2016 Q1 [1].

Headlines:

  • 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.39%, the quarterly change is nowcast to be 0.35%
  • 2015 Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.33%, the quarterly change is nowcast to be 0.33%

These nowcasts represent a continued downward revision for 2015 Q4 and 2016 Q1.

Once again we are seeing a further weakening of our own estimates of economic growth in Scotland which raises the prospect that the Scottish economy may well have contracted in Q4 of 2015 and is well under performing trend growth rates in 2016 so far.

2015 Q4 estimates from the Scottish Government are due to be released on Wednesday 6th April 2015, this will provide the first official estimate of growth in this quarter and for 2015 as a whole, but expectations are that these will confirm Scotland’s continued economic under performance related to the UK as a whole.

We have noted in a number of recent posts about the trend of continuing weak growth in Scotland. While we have noted a number of reasons for this, the most worrying aspect of this is the absence of any sustained response or evidence that the end of this downward spiral might be in sight.

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.

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March 2016 Scottish Economy Nowcasts

Today (29th February 2016) we release our latest series of nowcasts of the Scottish economy; these are our revised estimate of growth in 2015 Q4 and 2016 Q1 [1].

Headlines:

  • 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.51%, the quarterly change is nowcast to be 0.37%
  • 2015 Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.37%, the quarterly change is nowcast to be 0.35%

These nowcasts essentially represent no change from our earlier nowcasts for these two quarters, and confirm the point estimates previously derived. As we noted in our last post, our nowcasts for Q2 and Q3 of 2015 were more optimistic than the first official release of GDP from the Scottish Government, and with this confirmation of our last set of nowcasts showing very muted growth in 2015 Q4 and 2016 Q1, we again reassert our concern about the lack of economic growth in Scotland through the end of 2015 and start of 2016.

The concerns highlighted in our end of year review post are still central to the path of Scottish growth (principally the impact of low Oil prices and continued weak export demand). To this list, one must now note the impact of any uncertainty associated with the forthcoming referendum on UK membership of the European Union. While, as was true of the Scottish Independence referendum in 2014, it is difficult to know ex—ante what impact the referendum will have on the path of economic growth, to the extent that businesses delay investment in the UK and/or Scotland it will certainly be one of the factors relevant to any assessment of the economic performance of the Scottish economy. This general economic uncertainty is perhaps most obviously being reflected in UK consumer confidence which is now at its lowest level since the end of 2014.


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.

February 2016 Scottish Economy Nowcasts

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 [1].

Headlines:

  • 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.


[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.

December 2015 Scottish Economy Update

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

Headlines:

    • 2015 Q3 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.43%, the quarterly change is nowcast to be 0.36%
    • 2015 Q4 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.59%, the quarterly change is nowcast to be 0.40%

These nowcasts represent a very slight upward revision for 2015 Q3, and a downward revision of our initial nowcasts for Q4 2015.

Scottish economic performance is poor, and has been for some months now. Our nowcasts suggest little reason for optimism in Q4. We noted in our last nowcast post in November that our December nowcasts would be particularly informative, given that they are the first nowcasts which we have produced for 2015 Q4 that have used data relating to 2015 Q4 itself. That these new data have resulted in a weakening of our estimates for growth in Q4 is a cause for some concern. While, as we observed last month, the underlying indicators are supportive of continued, if weak, growth in Scotland through 2015 the current trend is clear and should be a real worry for policymakers.

Prof. Brian Ashcroft in the November 2015 Fraser Economic Commentary summarised the factors helping to boost economic growth in Scotland (low inflation, low interest rates, net immigration, some earnings growth) as well as those factors dragging growth down (further austerity, household debt levels). In addition, he noted the ever-present effect of external demand on the Scottish economy and the factors boosting and hampering growth in external markets. The key thing in external demand, for us, is that growth in the rest of the UK appears to be weakening although is still outperforming growth in Scotland.

If there is any further weakening of growth in the rest of the UK, it is likely that this will have a significant impact on the Scottish economy given that the rest of the UK is the primary destination for exports from Scotland. To the extent that there is some weakness in the rUK economy which is encouraging the Bank of England to maintain a policy of historically low interest rates, this is perhaps helpful to Scotland, but – short of a significant increase in export diversity – growth in rUK is going to continue to be vital to the health of the Scottish economy.

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.