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!
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.
Slightly later than usual, here are our monthly nowcasts of the Scottish economy, covering the first two quarters of 2018.
Our model suggests that:
- GVA growth in 2018 Q1 was 0.29%, or at an annual rate 1.18%
- GVA growth in 2018 Q2 is 0.29%, or at an annual rate 1.16%
Next month the Scottish Government will release official estimates covering the first three months of 2018, against which we can compare our Q1 estimate.
By way of comparison, UK GDP growth in Q1 was only 0.1%. If our nowcasts are correct, this would be substantially weaker than growth in Scotland over the same period.
Similarly, if our nowcasts are accurate, it would also mean that the economy has realised nearly half of the growth that the Scottish Fiscal Commission recently forecast for 2018 as a whole (they estimate growth over the year of 0.7%).
0.3% growth in the first three months of 2018 is nothing to write home about, but it would be better than the UK in the same period, and better than many might be expecting.
Next week the Fraser Economic Commentary, supported by Deloitte, is released. This will contain updated forecasts for the Scottish economy for 2018 and beyond. It will also look in more detail about what the various survey and data releases tell us about the health of the Scottish economy.
With Scottish GDP data out tomorrow, this blog provides a (very!) quick and brief update on our latest estimates of recent and current Scottish GDP:
- Our nowcast for GVA growth in 2017Q4 is 0.32% which, at an annual rate, is 1.28%
- Our nowcast for GVA growth in 2018Q1 is 0.36% which, at an annual rate, is 1.43%
We will see how close our point estimate is to the data for 2017 Q4 released tomorrow.
Meanwhile, for the interested reader, the chart below summarises the first release, latest release, and average nowcast estimate for Scottish GDP since 2014.
We can see that while our model does not generate estimates with the same volatility as the official GVA series, nevertheless, there is a clear consistency to the trend observed in all three series. We can also see that the revisions which take place to the GDP estimates can be substantial (e.g. Q1 2014, or Q2 2016).
Similarly, as the chart below shows, our average nowcast estimate over this same period is very close to the average initial release estimate for Scottish GDP over this period, suggesting that -on average- our model has been reasonably good at estimating changes in Scottish GDP.