GDP first quarterly estimate, UK: January to March 2022

• UK gross domestic product (GDP) is estimated to have increased by 0.8% in Quarter 1 (Jan to Mar) 2022, and by 8.7% compared with Quarter 1 2021.
• In output terms, services increased by 0.4% with the largest contributors from information and communication, accommodation and food, and transportation and storage industries, while there was a decline in wholesale and retail.
• In Quarter 1 2022, there was a 0.6% increase in household consumption partially offset by large movements in international trade flows; however, there is some additional uncertainty on the EU trade flows because of recent changes in how some of these data are collated.
• The level of quarterly GDP in Quarter 1 2022 is now 0.7% above its pre-coronavirus level (Quarter 4 (Oct to Dec) 2019).
• Monthly estimates published today show that GDP rose by 0.7% in January, whereas there was no growth in February 2022 and a fall of 0.1% in March 2022.

UK gross domestic product (GDP) is estimated to have increased by 0.8% in Quarter 1 (Jan to Mar) 2022 (Figure 1). The level of quarterly GDP in Quarter 1 2022 is now 0.7% above its pre-coronavirus level (Quarter 4 2019). Monthly GDP estimates published today show that GDP fell by 0.1% in March 2022, following growth of 0.7% in January 2022 and no growth in February 2022.

The Office for National Statistics (ONS) produces estimates of both monthly and quarterly GDP using separate methods. Both estimates of GDP have slightly different pre-coronavirus levels (February 2020 for monthly GDP and Quarter 4 2019 for quarterly GDP). For more information, please see our article, Measuring monthly and quarterly UK gross domestic product during the coronavirus (COVID-19) pandemic.

Nominal GDP rose by 2.5% in Quarter 1 2022 and is 11.0% higher than the same quarter a year ago. It is now 8.6% above its pre-coronavirus pandemic levels.

The implied GDP deflator rose by 1.8% in Quarter 1 2022 (compared with Quarter 4 2021), mainly driven by a 1.3% increase in the implied price of household consumption.

Compared with the same quarter a year ago, the implied GDP deflator rose by 2.1%. There was also a 5.2% decline in the implied price of government consumption. However, as there is no market price for this expenditure, we recommend caution in interpreting the movements in this implied price, particularly over the course of the coronavirus pandemic.

The implied GDP deflator represents the broadest measure of inflation in the domestic economy, reflecting changes in the price of all goods and services that comprise GDP. It is important to note that the GDP deflator covers the whole of the economy, not just consumer spending. This includes the "implied" price of government consumption, which is the expenditure that is incurred by government in producing non-market goods and services.

Movements in the implied GDP deflator in 2020 and 2021 have been largely affected by the government consumption deflator, which is the expenditure that is incurred by government in producing non-market goods and services, such as health and education. The volume of government activity fell while at the same time government expenditure increased in nominal terms. This reflects how we record volume estimates of health and education as explained in our blog, Public services: measuring the part they play in the economy through the pandemic.

Figure 2 shows the latest GDP performance for the G7 economies. Most of the selected economies have reached their pre-coronavirus pandemic levels (Quarter 4 2019). Recent analysis, though, highlights the challenges of making international comparisons of GDP at this time and suggests it may be useful to compare nominal and real estimates of GDP, as well as estimates excluding government expenditure.

In Quarter 1 (Jan to Mar) 2022, there have been increases in services, production and construction output.

Services

Services output rose by 0.4% in Quarter 1 (Jan to Mar) 2022 and by 9.9% compared with Quarter 1 2021. It is now 1.4% above pre-coronavirus pandemic levels. There was an increase in output from information and communication (3.6%), driven by rises in computer programming and information service activities (Figure 3). The quarterly rise in accommodation and food services (5.1%) follows the adverse impact of the Omicron variant towards the end of Quarter 4 (Oct to Dec) 2021.

There was an increase in transport and storage (3.6%) because of positive contributions in warehousing and support activities (4.3%), land transport services (3.8%), postal activities (7.0%) and air transport (14.5%). This was partially offset by a 15.9% fall in water transport activities.

Administrative and support service activities rose by 2.8% in Quarter 1 2022. This reflected a rise in travel agencies, tour operator and other related activities, driven by the effect of easing coronavirus (COVID-19) restrictions on the tourism industry (which also had a positive impact on air transport). This is further shown in our bulletin, GDP monthly estimate, UK : February 2022.

Within services, however, there was a 2.3% fall in all three sub-industries within the wholesale and retail trade, and repair of motor vehicles and motorcycles sub-sector. The Business Insights and Conditions Survey (BICS) highlighted that around 40% of businesses within the wholesale and retail trade industry reported global supply chain disruptions at the end of the first quarter of 2022. The Society of Motor Manufacturers and Traders (SMMT) vehicle data noted hampered deliveries of car and commercial vehicles because of global supply chain pressures, including shortages of semiconductors. Retail sales volumes fell across the quarter, as shown in our bulletin, Retail sales, Great Britain: March 2022.

Human health and social work activities fell by 1.8% in Quarter 1 2022, reflecting a large fall in COVID-19 detection activities, such as NHS Test and Trace, COVID-19 vaccination programme and lateral flow orders. This follows a marked increase in output for human health and social work activities at the end of Quarter 4 2021, because of the COVID-19 vaccination booster campaign.

Production

Production output rose by 1.2% in Quarter 1 2022, but remains 1.8% below pre-coronavirus pandemic levels partially because of supply chain challenges.

The rise in production output was primarily driven by a rise in manufacturing output (1.3%). There were large increases in the manufacture of basic metals and metal production (8.4%); other manufacturing and repair (5.3%); and manufacture of food products, beverages and tobacco (2.6%). This was partly offset by a 12.9% fall in the manufacture of basic pharmaceutical products and pharmaceutical preparations, following strong growth in Quarter 4 2021 (9.4%). However, there was a 3.3% fall in the manufacture of transport equipment reflecting supply chain shortages, which led to temporary closures of factories in January and February 2022.

Construction

Construction output rose by 3.8% in Quarter 1 2022 and is now 1.9% above pre-coronavirus pandemic levels.

Increases in both new work and repair and maintenance (2.8% and 5.5% respectively) contributed to the quarterly growth. At the type of work level, seven of the nine sectors saw an increase with only infrastructure and public other new work seeing falls.

Non-housing repair and maintenance was the main contributor to the increase to quarterly growth in Quarter 1 2022 increasing by 7.4%.

Further detail on construction growth rates can be found in Construction output in Great Britain: March 2022, new orders and Construction Output Price Indices, January to March 2022.

Expenditure rose by 0.8% in Quarter 1 (Jan to Mar) 2022. There was an increase in household consumption, while there have been some large gross trade flows in the first quarter of this year. However, there is some additional uncertainty on these EU trade flows because of recent changes in how some of these data are collated. For more information please refer to the trade section of this release and our recent blog, Understanding the latest changes to UK trade figures with the EU.

We previously referred to practical challenges in balancing gross domestic product GDP during the coronavirus pandemic and in Quarter 1 2022 there have been challenges in balancing the expenditure component of GDP. In line with our previous approach, rather than force a GDP balance for expenditure by heavily adjusting the expenditure components, we have decided to show the best estimate of each underlying component at this stage. For further information, please refer to the gross capital formation and Measuring the data sections.

Private consumption

Within private consumption, household expenditure rose by 0.6% in Quarter 1 2022 but remains 0.5% below pre-coronavirus (COVID-19) pandemic levels. The quarterly increase was driven by rises in spending on restaurants and hotels; clothing and footwear; and miscellaneous goods and services. There were partial offsets by net tourism and transport, mainly because of a fall in expenditure on motor cars.

Consumption of government goods and services

In Quarter 1 2022, real government consumption fell by 1.7% driven by large falls in health expenditure. This was driven by reductions in coronavirus (COVID-19) activities, following the introduction of the Living with COVID-19 programme. There was a large increase in health spending in the previous quarter, reflecting a rise in the NHS Test and Trace and COVID-19 vaccination programmes, including the booster programme. The decline in the first quarter of this year in part reflects lower levels of these COVID-19 activities, as further shown in our latest GDP monthly estimate bulletin. However, there was an increase in other types of health activities, including face-to-face appointments at GP surgeries and a continuation of the increased use of telephone consultations.

Net trade

The UK’s trade deficit for goods and services widened to a record 5.3% of nominal GDP in Quarter 1 2022 (Figure 6), largely reflecting a sharp increase in goods imports. This partly reflected volatile movements of non-monetary gold. Excluding non-monetary gold, the trade deficit was 4.1% of nominal GDP in Quarter 1 2022.

Our trade estimates are primarily based on data collected by HM Revenue and Customs (HMRC). A recent HMRC data collection change affected our EU to Great Britain import statistics, which are under continued assessment for the impact of this change. We therefore recommend caution in interpreting movements across periods, as outlined in our latest UK trade bulletin. For more information, please see the Measuring the data section.

Total import volumes rose by 9.3% in Quarter 1 2022 because of increases in imports of goods (17.0%), driven by unspecified goods, machinery and transport equipment and fuels. Imports of services saw a decrease (11.2% fall). This was partially offset by a fall in import services in other business services, telecommunications, travel and transport services.

Total export volumes fell by 4.9% in the first quarter. The 8.9% decline in export goods was driven by unspecified goods, machinery and transport equipment and fuels. Services exports falls were driven by other business services, financial services, intellectual property and telecommunications. This was partially offset by rises in travel services, personal cultural and recreational services and transport services.

Gross capital formation

Gross fixed capital formation rose by 5.4% in Quarter 1 2022 and is now 3.4% above pre-coronavirus levels. This reflected an increase in government investment (23.6%), particularly in other buildings and structures. However, at this stage the data are prelimary and subject to revision. This was partially offset by a 9.4% fall in transport investment.

Business investment fell by 0.5% in Quarter 1 2022 and remains 9.1% below its pre-coronavirus pandemic levels. The Bank of England Decision Maker Panel data estimated that business investment was 8.0% lower in Quarter 1 2022 than it otherwise would have been because of coronavirus pandemic effects. There was a fall in capital expenditure on transport equipment in Quarter 1 2022, because of supply chain constraints.

Our early estimates show that, excluding the alignment adjustment, there was an increase in inventories in Quarter 1 2022, driven by rises in wholesale and retail.

We have decided to show the best estimate of each underlying component of expenditure at this stage rather than force a balance, because of challenges in balancing GDP. In doing so, this means that the alignment adjustment, used to align the expenditure measure to average GDP, is larger than normal (Table 2). For more information, please see the Measuring the data section.

Nominal gross domestic product (GDP) rose by 2.5% in Quarter 1 (Jan to Mar) 2022 and is now 8.6% above pre-coronavirus (COVID-19) pandemic levels. This was driven by a rise in all the main components of income (Figure 7).

Compensation of employees rose by 1.5% in Quarter 1 2022, driven by increases in wages and salaries (1.3%), because of rises in private sector wages and salaries, and social contributions (2.6%), because of rises in National Insurance contributions.

Taxes rose in Quarter 1 2022, driven by rises in Value Added Tax (VAT) receipts, Insurance Premium Tax (IPT), Stamp duty and Tobacco duty. This was partially offset by falls in betting and alcohol duty. Subsidies increased in Quarter 1 2022, primarily driven by rises in housing equity injections.

Excluding the alignment adjustment, gross operating surplus (GOS) increased by 4.9% (Table 3). Note that alignment and balancing adjustments are typically applied to the GOS component to help balance the different approaches to GDP. More detail can be found in Section 9: Strengths and Limitations.

Contribution to growth

Contribution to growth indicates how many percentage points a sector or industry is adding or removing from a given growth rate, usually headline gross domestic product (GDP) growth.

Chained volume measure

Data in chained volume measures (CVM) within this bulletin have had the effect of price changes removed (in other words, the data are deflated), except for income data, which are only available in current prices.

Gross domestic product (GDP)

A measure of the economic activity produced by a country or region. Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP:

• the output approach
• the expenditure approach
• the income approach

Index numbers

Data relative to a given base value, which typically refers to a particular year or quarter.

For further definitions, please see the Glossary of economic terms.

Reaching the gross domestic product (GDP) balance

The different data content and quality of the three approaches – the output approach, the expenditure approach and the income approach – dictates the approach taken in balancing quarterly data. In the UK, there are more data available on output in the short-term than in either of the other two approaches. However, to obtain the best estimate of GDP (the published figure), the estimates from all three approaches are balanced to produce an average, except in the latest two quarters where the output data takes the lead because of the larger data content.

Quarterly GDP is a balanced measure of the three approaches while the output approach focuses solely on growth in gross value added (GVA) and output as a proxy for GDP. Because of this there is a difference in 2020 and 2021 data (in both levels and growths terms) between the quarterly publications (average GDP) and the GDP monthly estimate (output approach to GDP). Quarterly GDP is the lead measure of GDP because of its higher data content and inclusion of variables, which enable the conversion from a GVA concept to a GDP basis.

Information on the methods we use for Balancing the output, income and expenditure approaches to measuring GDP is available.

Alignment adjustments, found in Table M of the GDP first quarterly estimate data tables, have a target limit of plus or minus £3,000 million on any quarter. However, in periods where the data sources are particularly difficult to balance, larger alignment adjustments are sometimes needed as explained in our recent article, Recent challenges of balancing the three approaches of GDP.

In this release, we have faced some additional uncertainty in renconciling the expenditure approach to GDP in particular on these EU trade flows because of recent changes in how some of these data are collated. For these reasons, rather than forcing a GDP balance for expenditure by heavily adjusting the expenditure components, we have decided to show the best estimate of each underlying component at this stage.

In doing so, this means that the alignment adjustment, used to align expenditure to average GDP, is larger than normal (Table 2). This approach preserves the component level movements and shows the level of challenge and uncertainty currently within the expenditure approach to GDP. Work will continue before the next GDP quarterly national accounts release with a focus on the expenditure approach to GDP and we will continue to review this over the coming months as and when more information becomes available.

To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where data content is particularly weak in a given quarter because of a higher level of forecast content. The balancing adjustments applied in this estimate are shown in Table 4. The resulting series should be considered accordingly.

The UK National Accounts are drawn together using data from many different sources. This ensures that they are comprehensive and provide different perspectives on the economy, for example, sales by retailers and purchases by households. Further information on measuring gross domestic product (GDP) can be found in the Guide to the UK National Accounts and more quality and methodology information is available in the Gross domestic product (GDP) QMI.

Important quality information

There are common pitfalls in interpreting data series, and these include:

• expectations of accuracy and reliability in early estimates are often too high
• revisions are an inevitable consequence of the trade-off between timeliness and accuracy
• early estimates are based on incomplete data

Very few statistical revisions arise as a result of “errors” in the popular sense of the word. All estimates, by definition, are subject to statistical “error”.

Many different approaches can be used to summarise revisions; the “Accuracy and reliability” section in the Gross domestic product (GDP) Quality and Methodology Information analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations.

GDP estimates for Quarter 1 (Jan to Mar) 2022 are subject to more uncertainty than usual as a result of the challenges we faced estimating GDP in the current conditions. Differences in the methods for estimating the output of health and education services across different countries mean GDP may be less internationally comparable during the coronavirus (COVID-19) pandemic and recovery than usual, so should be made with increased caution. For more information, please refer to our blog, Why has UK GDP fallen so sharply in the pandemic?

Consultation on Office for National Statistics (ONS) release times

The Office for Statistics Regulation (OSR) has finalised its consultation on release practices. The ONS has welcomed the findings in a statement on the ONS’s response to the OSR’s proposals, specifically noting that the release-time exemptions, which were granted during the coronavirus pandemic, are now incorporated into the revised Code of Practice. As such, the quarterly GDP release will continue to be published at 7am.