1st July 2013: GDP revisions

GDP rose by 0.3% in 2013q1 but there were revisions to previous estimates in line with methodological changes implemented with the Blue Book 2013. This article highlights the main revisions.

There is not room here to go into details of all the changes to the methodology so we shall highlight the impact of these changes:

GDP in current prices is around 1% higher than previously estimated with household consumption and Investment both higher. The pattern of growth across years is fairly unchanged with one notable exception. Growth has been shifted into 2008 from 2009 by the inclusion of new quarterly HMRC data on company profits which better reflects the timing of the financial crisis.

In volume terms, there is the additional effect from revisions to deflators which are applied to current price data to calculate chained volume measures. These changes have had a greater effect on individual quarters than is evident from the nominal series but the message remains the same. Figure 1 shows the new estimate of GDP in volumes against the previous estimate, highlighting the downward revision to 2009. Since then, the path of growth is relatively unchanged, leaving us at 96% of the outturn achieved in 2008q1.

The revisions are not homogenous across industries as can be seen from Figure 2. The large private services sector is dominant and so it is no surprise that this exhibits the same shape as overall GVA, with 2009 worse than previously estimated but thereafter a very similar, slow recovery. Government output also follows this shape while manufacturing does so but with a much smaller revision. Construction on the other hand has been revised up although the pattern of growth through the series varies.

Looking at the components of demand, we can see that the biggest revisions came in investment where a new approach was taken to incorporate a lot more data at a lower level of aggregation. Business investment has been revised down in general but particularly in 2011-2012 while government investment has not fallen by as much as previously thought. The profile of household spending is broadly the same, showing little pickup until 2012.

Government spending grew by more than was previously thought, particularly in 2012 and is the only component of demand to exhibit a consistent upward trend since the start of the recession.

Incomes have also been restated with wages and salaries revised down, mainly in 2009 and 2012. With real incomes heading south as wages & salaries and benefits both fell in 2013q1, only a big drop in the savings ratio allowed household spending to rise.

Despite methodology changes and revisions to deflators, overall, the general trends remain similar to previous estimates, with the UK economy still well below pre-recession peaks.

Written by Stephen Adams