Today, the Scottish Government published their growth estimates for the second quarter of 2019 – with the results suggesting that the Scottish economy contracted by -0.3% in Q2 2019.
These estimates broadly mirror the trends we’ve seen at the UK level, where over the same period, UK output contracted by -0.2%.
Recall that today’s figures come on the back of strong growth in Q1 of this year. Over the first three months of 2019, the Scottish economy grew by +0.6%.
As we argued back then, movements in Scottish GDP data have been impacted by the stockpiling that has been taking place as a result of Brexit.
Uncertainty surrounding a no-deal Brexit back in March led many firms to build up their supplies, leading to a boost in GDP in Q1. As the deadline of the UK’s departure from EU moved forward to October, and immediate no-deal panic preparations calmed, firms have since unwound these preparations leading to GDP in Q2 slipping back.
Two immediate reflections. Firstly, it is important in these times to focus upon longer-term trends and not the volatile quarter-to-quarter changes. Here again, we see Scottish growth remaining fragile and well below trend.
Secondly, we’ve seen emerging UK data suggest that activity has picked up over the summer months. This suggests that the likelihood of a technical recession over Q2 and Q3 of 2019 – i.e. two consecutive quarters of negative GDP growth – remains relatively small (but not impossible).