April nowcast update

With 29th of March now behind us, but with the uncertainty remaining rather than resolved, we have produced a new nowcast for the Scottish economy for Q1 2019.

Since our last nowcast in early March we have received official estimates of GDP growth in 2018 Q4. These place growth in Q4 at +0.3%, slightly ahead of UK growth in Q4 of 0.2%.

This is in line with our last nowcast for Q4 2018 which put growth at 0.29%.

Services growth again outpaced the overall economy with growth of 0.5% in Q4 of 2018, but production sector growth was down -0.9% for the second quarter in a row.

These latest official data put overall growth in Scotland in 2018 at 1.4%, still significantly below long-run trend growth.

Turning to growth in Q1 2019, our latest estimate puts growth at 0.31%, or at an annualised rate 1.26%.

One reason for this is that consumer and business confidence remains low.

We will set out some scenarios for different Brexit scenarios in the next Fraser Economic Commentary.

These will consider how any resolution to the political and economic uncertainty around Brexit – and any likely policy response – might impact on economic outcomes over the forecast horizon.

We will continue to produce monthly nowcasts to seek to identify any movements in quarterly growth rates.

 

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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.

June nowcast update!

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.

 

May nowcasts!

We’ve once again run our nowcasting model on the latest data on Scottish economy to provide estimates of current and recent growth in the economy.

Our model produces the following estimates of growth in the Scottish economy:

• Our nowcast for GVA growth in 2018 Q1 is 0.28% which, at an annual rate, is 1.13%

• Our nowcast for GVA growth in 2018 Q2 is 0.32% which, at an annual rate, is 1.29%

These represent our first estimate for growth in 2018 Q2, and an update on our previous estimate for 2018 Q1 – which last month was estimated to be 0.36% (or annualised at 1.43%).

Thus our model has revised down our estimate of growth in the first three months of 2018. With the episode of poor weather which Scotland experienced in this period, key economic indicators may be a little more volatile in Q1 2018.

Nevertheless, recent Retail Sales data shows that the volume and value of retail sales in Scotland grew 0.5% in the first three months of 2018 (this was in contrast to Great Britain where volumes of retail sales were down 0.5% and value of retails sales was flat).

Since our last set of nowcasts, we have also received new official data on the performance of the Scottish economy in the final three months of 2017.

Last month we estimated that growth in 2017 Q4 was 0.32% (which at an annual rate, is 1.28%).

The official estimates of GDP growth from Scottish Government put growth in the final three months of 2017 at 0.31%.

Well done to our model!