June 2015 Nowcasts

Today (1st June) we release our latest set of nowcasts of the Scottish economy; these are our revised estimates of the growth in the current quarter (2015 Q2) and revised estimates for 2015 Q1 [1].

Headlines:

  • 2015 Q2 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.08%, the quarterly change is nowcast to be 0.52%
  • 2015 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.09%, the quarterly change is nowcast to be 0.52%

Both of these nowcasts are broadly in line with those obtained last month, and are very similar to each other suggesting that the performance of the economy in Q1 and Q2 of 2015 has been broadly similar. After three successive quarters of growth of 0.6% – between the second, third and last quarters of 2014 – our nowcasts are consistent with a slowing of the quarterly rate of growth in the first half of 2015.

This very limited change in our nowcast estimates is a reflection of the muted change in the underlying fundamentals for Scotland. The very slight increase that we find is likely driven by those factors showing some moderate increases, for instance PMI Northern Ireland, which is known to be useful in nowcasting the Scottish economy. In addition, BoS PMI Scotland (released mid-May) moved from showing a slight decline in March to slight growth in April.

This reaffirms our view from May 1st that growth is likely to continue to be modest but positive in Scotland through to the middle of 2015.

For details of how these, and other “live” data on Scottish economic activity are used to construct “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.

[2] Bank of Scotland PMI Scotland are reported by Lloyds Banking Group here.

May 2015 Nowcasts

Today (1st May) we release our latest set of nowcasts of the Scottish economy; these are our estimates of the growth in the current quarter (2015 Q2) and revised estimates for 2015 Q1 [1].

Headlines:

  • 2015 Q2 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.05%, the quarterly change is nowcast to be 0.51%
  • 2015 Q1 GDP growth in Scotland, at an annualised rate, is nowcast to be 2.29%, the quarterly change is nowcast to be 0.53%

This estimate for 2015 Q1 is the lowest we have yet obtained for this quarter. Our nowcasts show that growth in Q1 and Q2 2015 has been weaker in Scotland than we nowcast it to be at the end of 2014, and lower than the first official estimate of Q4 2014 growth in the Scottish economy released in April 2015. While the Scottish economy is still growing, these estimates suggest it is doing so at a lower rate than in previous quarters.

In terms of recent economic news, UK growth in the first quarter of 2015 was recently announced to be 0.3 per cent, somewhat weaker than expected and lower than previous quarters. This has important implications for Scotland given that, based on the most recent Scottish Government data, around 62 per cent of all Scottish exports are to the rest of the UK. In addition, we learnt on the 22nd of April that Scottish manufactured exports dipped by 0.8 per cent in Q4 2014. To put this into context, according to data released in January 2015, 60.2 percent of Scottish exports to the rest of the world (i.e. outside the UK) were from the manufacturing sector.

Beside this somewhat negative news for the Scottish economy, we have also seen better news on employment in Scotland, with youth unemployment (both in terms of the level and the rate of youth unemployment) at its lowest level in the past five years. This positive news is echoed in the Bank of Scotland Jobs report (released on 20th April); albeit this report suggests that the pace of job growth is slowing.  In addition, it suggests a decline in jobs in some parts of Scotland (Aberdeen), likely linked to recent events affecting the North Sea oil and gas sector, but job growth elsewhere (e.g. Dundee).

External factors for both the UK and Scottish economies are still a cause for concern. Growth in Europe is still weak, explained in part by ongoing growth concerns across the globe (Wall Street Journal). Even China has started using monetary policy to stimulate its economy (Bloomberg). Employment growth, in aggregate, is continuing in the UK and Scotland but at a slower pace and with an unclear on-going impact on real wages which have grown somewhat in the past 5 months after 5 years of decline (Financial Times). The imminent UK General Election and the associated political uncertainty, which if the opinion polls are to be believed won’t be settled with the announcement of the election result itself, is unlikely to aid economic growth in Q2 2015 -even if the scale of its impacts is uncertain- something that the Financial Times highlighted this week.

In short, the prevailing news suggests that growth is likely to continue to be modest but positive through the middle of 2015.

For details of how these, and other “live” data on Scottish economic activity are used to construct “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.

[2] Bank of Scotland PMI Scotland are reported by Lloyds Banking Group here.