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.

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February nowcasts of the Scottish economy…

Apologies for the late release of this nowcast update.

We held off producing a February nowcast update as we awaited information on Consumer Confidence. However as we reach the halfway point in the month, we must push on without this indicator in the model.

The latest official estimates of GDP growth for Scotland cover 2018 Q3. These estimate growth of 0.2%.

Our model suggests that growth remains weak in Scotland.

Our latest nowcasts is that the Scottish economy grew by a below trend 0.31% (albeit slightly above the UK – which was 0.2%) in Q4 2018. At an annualised rate this is 1.24%.

Growth in 2019 Q1 is expected to be similarly weak with a nowcast estimate of 0.33%, which at an annual rate is 1.31%.

The next month or so will be a critical period for the UK and Scottish economy as we head towards 29th March 2019. Perhaps by the time of our next nowcast in a couple of weeks we will have a clearer idea of the economic landscape post March 29th.

January Nowcasts of the Scottish Economy

Just before Christmas the latest estimates of GDP growth in Scotland, covering the 3rd quarter of 2018, were released by the Scottish Government.

These data showed that growth in Scotland in Q3 was 0.3%, half the rate of the UK over the same period.

This represented a slowing of growth in Scotland relative to the previous quarter (in which growth was 0.5%).

Our latest nowcast for the Scottish economy covers the final quarter of 2018, and these suggest that growth in 2018 Q4 was 0.36% which, at an annual rate, is 1.46%. This is broadly in line with growth in the previous quarter.

The shape of economic growth in the UK and Scotland in the first three months of 2019 will of course be shaped by preparations and the resolution of the current uncertainty around Brexit. Nevertheless, we will provide an initial update in early February with our model predictions for growth in Q1 2019.

November nowcast update!

Labour Market data released later this morning will provide an update on how the Scottish labour market performed over the three months to the end of September.

In general the labour market has provided good news in recent years, with near record low unemployment and near record high employment. In contrast, economic growth has been weaker.

Recently it appears that growth may be beginning to pick up.

The Scottish Government estimated that the economy grew by 0.5% in 2018 Q2, slightly higher than in the UK as a whole.

Last week we learned that the UK economy had a strong Q3, growing at 0.6%.

While official estimates of growth in Scotland in Q3 will not be released until 19th December, our nowcasting model can provide some early insight into growth in Scotland in Q3 and indeed Q4.

Our model suggests that:

  • GVA growth in 2018 Q4 is 0.42% which, at an annual rate, is 1.68%
  • GVA growth in 2018 Q3 was 0.39% which, at an annual rate, is 1.57%

While these estimates suggest weaker growth than in 2018 Q2, our nowcasts for 2018 Q2 were also weaker (averaging around 0.3%) than the official estimate from the Scottish Government.

Next month’s nowcast will reflect the inclusion of the first survey data for 2018 Q4 in our model, and we will see what that does to our estimates!