With official estimates of GDP growth in Scotland in Q3 2019 due to be released later this month, we’ve updated our nowcasts for the Scottish economy for Q3 and Q4 2019.
These estimates put growth in Scotland:
- For 2019 Q3 growth at 0.21% which, at an annual rate, is 0.83%
- For 2019 Q4 GVA growth is 0.25% which, at an annual rate, is 0.99%
These estimates represent similar estimates to those released last month – and a continuation of the sustained period of weak growth experienced through much of the past few years.
In the last set of official estimates of growth in Scotland, growth in the year to Q2 was 0.6%, included in this estimate was the contraction in GDP in Q2 itself.
The positive growth estimate for Q3 implies that Scotland will not enter recession in 2019.
Taking our estimates for Q3 and Q4 (above) together with the official estimates for 2019 Q1 and Q2, implies economic growth in Scotland of 0.7% between 2019 Q4 and 2018 Q4, or on a 4 quarter on 4 quarter basis, growth is estimated to be 0.8% in 2019.
This month our nowcasting model has produced the following estimates of economic growth in Scotland in Q1 and Q2 2019:
- GDP growth in 2019 Q1 is estimated to be 0.29% which, at an annual rate, is 1.18%
- GDP growth in 2019 Q2 is estimated to be 0.31% which, at an annual rate, is 1.26%
Later this month (27th June) we will receive official estimates of economic growth for Q1 2019 from the Scottish Government, and we will be able to compare these to our own estimates.
Our latest nowcast suggests that this number will come in around 0.3%, but having dipped very slightly in the latest estimate, perhaps it could surprise on the downside!
Our new nowcast – the last one of this year – provides updated estimates of GDP growth in Scotland.
- Our nowcast for GVA growth in 2018 Q3 is 0.35% which, at an annual rate, is 1.42%
- Our nowcast for GVA growth in 2018 Q4 is 0.39 which, at an annual rate, is 1.57%
These represent slight downward revisions to our estimates for 2018 Q3 and Q4 released last month.
We will learn the first official estimate of growth in Q3 of 2018 on the 19th of December 2018. Our current nowcast (0.35%) suggests we will see a reduction in the growth rate relative to Q2’s official measure of growth (0.5%).
Since our November nowcast we have had new data on a number of key indicators.
While the Scottish labour market continues to record impressive headline statistics on employment (at 75% not far off its record high) and unemployment (at 3.8% at its joint-record low), wage growth is weak and barely above inflation.
Consumer confidence in November took a sharp dip from -17 in October, to -29, suggesting that consumers are increasingly pessimistic about the economic outlook. Relatedly perhaps, recent data on retail sales growth in Scotland showed growth was weak, and weaker than in the UK as a whole.
Balancing this out, and despite heightened economic policy uncertainty, Royal Bank of Scotland PMI recorded 53.4 in November, indicating solid expansion in activity, above the figure for the UK as a whole. This suggests that firms are continuing in ‘business as usual’ mode. Thus activity appears to be being maintained, but this does not appear to be being translated into improvements in wages and consumption.
With the highly uncertain political climate, our monthly nowcasts will continue to incorporate the latest indicators to produce timely estimates of growth. We intend that these can provide clear signals about the economic situation in Scotland, well in advance of official statistics.
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!