May nowcasts…

Slightly later than usual, we release the results from our nowcasting model of the Scottish economy.

Our nowcasts show:

  • GVA growth in 2017 Q1 was 0.31% which, at an annual rate, is 1.25%. This is down on our last nowcast.
  • Our first nowcast for GVA growth in 2017 Q2 is 0.34% which, at an annual rate, is 1.43%
It is little surprise that we’re seeing a downward revision to our estimate of 2017 Q1 Scottish GVA growth.

Two obvious (although not exhaustive) reasons for this, firstly the recent release of 2016 Q4 GVA growth estimates for Scotland showed that the economy contracted by 0.2% in the final quarter of last year. Secondly, the UK Q1 GDP growth estimate released last month showed slower growth in the UK than in recent quarters.

Our nowcasting model has tended to track fluctuations in growth reasonably well, while overestimating growth. For instance, our model showed below trend (but still positive growth) for 2016 Q4, and on the official data the economy contracted. Similarly, the model estimating positive growth in Q1 2017. Given this, a further contraction in the economy in Q1 -and thus a technical recession- is clearly a possibility.

We’ll be looking at, and commenting more, on the release of data for 2017 Q1 and Q2 in the coming weeks on the Fraser of Allander Institute blog (fraserofallander.org).

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April nowcasts!

This Wednesday we will get official estimates of Scottish GDP growth in Q4 2016. These estimates, for the first time, are reaching us within 100 days of the end of the quarter they relate to.

This is great news, and reflects the result of a lot of hard work by Scottish Government statisticians.

Our work to nowcast the Scottish economy has focussed on providing both ‘within quarter’ and ‘out of quarter, but before official estimates are released’ estimates of Scottish economic growth. We do this by modelling a range of hard (e.g. unemployment, refinery activities, etc) and soft (e.g. our own business survey data, PMI, etc) indicators for the Scottish economy.

Once again, at the start of a new month, we release our latest results. These show that:

  • GVA growth in 2016Q4 was 0.31% which, at an annual rate, is 1.24%. This is down substantially from our last estimate.
  • GVA growth in 2017Q1 is 0.38% which, at an annual rate, is 1.54%. This is virtually unchanged from our last nowcast estimate for 2017Q1.

The substantial weakening of our estimate for 2016 Q4 here is interesting. If realised though, this would still be a noticeable improvement on prior quarterly growth in 2016, which –on official data- are currently 0.0% (Q1), 0.2% (Q2) and 0.2% (Q3).

Our latest nowcast for 2016Q4 is our last (in our terminology, the 6th) nowcast for this quarter. We’ve generally found that the 4th nowcast, released one month after the end of the quarter, and incorporating information on each month of the quarter in question, is the most accurate. The 4th nowcast was more optimistic, suggesting growth of 0.38% in 2016 Q4.

Our expectations therefore are of positive growth in the Scottish economy in 2016 Q4, somewhere in the range 0.3%-0.4%.

On Wednesday, we will find out how close we get to the official estimates!

February Nowcasts

As usual for the start of the month, we release the results from our nowcasting model of the Scottish economy.

Since our last update, we have received data on the performance of the Scottish economy in Q3 of 2016, indicating growth of 0.2%.

These data suggest the continuation two worrying trends, firstly Scotland lagging behind growth in the rest of the UK, and secondly, Scotland underperforming relative to its own long term trend rate of growth. We commented in greater detail on these issues here.

This month, our model estimates:

  • GVA growth in 20164 of 0.38% which, at an annual rate, is 1.51% (this is down ever so from our last release)
  • GVA growth in 2017 Q1 is 0.40% which, at an annual rate, is 1.59%. This is our first nowcast for 2017 Q1, and is based only on data to 2016 Q4.

We also received revised official data for Q2 2016 this month.

Initially, the official data put growth in Q2 of 2016 at 0.4%. This was a surprise, as we noted at the time. The reason being that our ‘central’ nowcast estimate suggested growth of less than 0.3%, plus we were expecting an negative impact on GDP growth from the closure of the Longannet power station- which given their one-off nature wouldn’t be captured in our model.

These revisions to Q2 GDP growth rate, now put growth much lower at 0.2%. With the one off impact of the closure of Longannet in Q2, this might not be too concerning, however it comes in a sequence of very low, or no, growth quarters for the Scottish economy.

More generally, we discussed the outlook for the Scottish economy in some detail in the last Fraser of Allander Economic Commentary, see the summary here. Suffice to say substantial challenges remain.

Key labour market indicators continue to be stronger than one might expect given the muted growth Scotland has experienced since 2015, although concern remains about rises in inactivity. However, with inflation set to increase through 2017 there are signs of worsening consumer confidence. Any weakening in household demand will pose a further challenge to a fragile Scottish economy through 2017.

January nowcasts

Happy New Year!

We start 2017 with a new update from our nowcasting model for Scotland. These nowcasts relate to the last two quarters of 2016, a year which has offered plenty of economic challenges for the Scottish economy.

We will receive official estimates of Scottish GVA for 2016 Q3 next week. For the moment, our model produces the following estimates:

  • Our nowcast for GVA growth in 2016 Q3  is 0.32% which, at an annual rate, is 1.29% (essentially unchanged from our last nowcast update).
  • Our nowcast for GVA growth in 2016 Q4 is 0.38% which, at an annual rate, is 1.53% (this is very, very slightly up on our last nowcast update).

Data published next week will be the first official figures on economic activity in Scotland in the immediate period after the Brexit vote. 

For comparison purposes, growth for the UK as a whole in the third quarter was recently revised up to 0.6%, partly on the back of stronger than expected consumer expenditure growth.

Note, the current data show that Q1 growth in Scotland was 0.0%, and in Q2 was above expectations, coming in at 0.4%.