ESRI Nowcast (July 2023 Estimate)
September 21, 2023
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- Using data available through 20th September 2023, we provide an update to our monthly estimate of modified domestic demand (MDD) using the ESRI’s Nowcasting model currently employed to support the forecasting exercise in the Quarterly Economic Commentary.
- We estimate that MDD grew 1.9% year-on-year in July 2023. While July saw a further tightening of financial conditions and more negative business sentiment indicators than 12 months ago, there were increases in the price of both goods and services as well as an improvement across a number of production sectors from 12 months ago. Based on data from July and partial data from August only, our nowcast estimates MDD for 2023Q3 to be 3.1% above its level in 2022Q3.
- The forecasting error in 2023Q2 (model fit value of 3.1% versus actual outturn of -0.4%) was likely due to a large increase in investment in actual infrastructure such as buildings and other fixed assets on the part of multinational enterprises (MNEs) in 2022Q2, which is included in MDD, and subsequent fall in 2023Q2. As there is no monthly indicator available that would pick up these transactions, it is outside the scope of the model to predict the fall in overall MDD from this source.