Q1 2016

Posted on Brexit, Nowcasts, Scotland, Slowdown

July 2016 Nowcasts

Today (29th June 2016) we release our latest series of nowcasts of the Scottish economy; these are our final estimate of growth in 2016 Q1 and our latest estimate for 2016 Q2 [1].

Headlines:

  • 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.28%, the quarterly change is nowcast to be 0.32%
  • 2016 Q2 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.52%, the quarterly change is nowcast to be 0.38%

These nowcasts represent a slight upward revision to our nowcasts for 2016 Q1 and Q2.

Despite including data made available during June 2016, these nowcasts are produced using data relating to the economy prior to the EU Referendum result. Thus, while for continuity we release these nowcasts, our expectation is that our future nowcasts, and indeed realisations of Scottish and UK GDP, for 2016 will be lower than those forecast prior to the result of the EU referendum result.

It is likely that the significant uncertainty evident since the announcement of the referendum result will have a negative effect in the short run as business and consumer confidence weakens leading to possible investment decisions either being delayed or cancelled. The increased uncertainty will likely act as a drag on inward investment, and potentially a stalling of other investment decisions, until after the uncertainty about the UK’s position with regards to its future trading arrangement with the EU and other markets is resolved.

That being said, no change to the UK and Scotland’s trading arrangements or labour market status will be confirmed, according to the UK Government, for some time (over two years by some estimates), although continued uncertainty about the future shape that these will take will raise significant challenges for the Scottish and UK economies as the unprecedented process of leaving the EU proceeds in the coming weeks and month.

Against this, the abrupt and sharp weakening of the pound against major currencies seen since the result was announced could make Scottish products more competitive overseas. But previous such periods suggest that there is a question over the price-responsiveness of Scottish exports (and Scotland’s major export markets are seeing their own forecasts revised down). Further, Scottish firms and consumers will see prices rise for imported goods, as these become relatively more expensive.

For details of how the data mentioned above, and other “live” data on Scottish economic activity are used to construct our “nowcasts”, see the Methodology page.

[1] Note as explained in the methodological paper (here), we nowcast gross value added (GVA) rather than gross domestic product (GDP), because this is the regional equivalent of GDP which is produced, but we refer here to GDP for intuitive ease.

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Posted on GDP, Nowcasts, Scotland, Slowdown

May 2016 Scottish Economy Nowcasts

Today (3rd May 2016) we release our latest series of nowcasts of the Scottish economy; these are our latest estimate of the growth in 2016 Q1 and our first estimates for 2016 Q2 [1].

Headlines:

  • 2016 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.17%, the quarterly change is nowcast to be 0.29%
  • 2016 Q2 GDP growth in Scotland, at an annualised rate, is nowcast to be 1.49%, the quarterly change is nowcast to be 0.37%

These nowcasts represent a continued downward revision for 2016 Q1, and an indication that the economic malaise in Scotland is continuing through Q2 2016. Recall though that these first estimates for Q2 do not use any data on Q2 itself (the first data for April will be released during May and used in our next nowcasts).

In our last blog post, we indicated that by the time of this blog we would have received official data on growth in Q4 of 2015. In addition, with the release of the Q4 data, we received a revised series of GDP data including revisions to Q3 2015 which resulted in the emergence of an economic contraction in contrast to the previous estimate for Q3 of muted growth. The effect of using these revised data is reflected in the downward revision to our estimates for 2016 Q1.

The Scottish economy is really struggling, both in relative (to the UK) and absolute terms. That so little focus has been given to this reality in the ongoing election campaign is puzzling. Nevertheless, it is important that the incoming Scottish Parliament give immediate attention to the ongoing economic torpor in Scotland, and give fresh impetus to efforts to boost Scottish economic growth.

For details of how the data mentioned above, and other “live” data on Scottish economic activity are used to construct our “nowcasts”, see the Methodology page.

[1] Note as explained in the methodological paper (here), we nowcast gross value added (GVA) rather than gross domestic product (GDP), because this is the regional equivalent of GDP which is produced, but we refer here to GDP for intuitive ease.