GDP first quarterly estimate, UK: July to September 2020

First quarterly estimate of gross domestic product (GDP). Contains current and constant price data on the value of goods and services to indicate the economic performance of the UK.

This is the latest release. View previous releases

This is an accredited National Statistic. Click for information about types of official statistics.

Cyswllt:
Email Ryan May

Dyddiad y datganiad:
12 November 2020

Cyhoeddiad nesaf:
22 December 2020

1. Main points

  • UK gross domestic product (GDP) is estimated to have grown by a record 15.5% in Quarter 3 (July to Sept) 2020, as lockdown measures were eased.
  • Though this reflects some recovery of activity following the record contraction in Quarter 2 (Apr to June) 2020, the level of GDP in the UK is still 9.7% below where it was at the end of 2019.
  • Compared with the same quarter a year ago, the UK economy fell by 9.6%.
  • While output in the services, production and construction sectors increased by record amounts in Quarter 3 2020, the level of output remains below Quarter 4 (Oct to Dec) levels, before the impact of the coronavirus (COVID-19) pandemic was seen.
  • The levels of expenditure remain considerably below their levels before the effects of the coronavirus, as the pickup in business investment has been much weaker than private consumption.

!

GDP estimates for Quarter 3 2020 are subject to more uncertainty than usual as a result of the challenges we faced estimating GDP in the current conditions.

Nôl i'r tabl cynnwys

2. Things you need to know about this release

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

Further information on all three approaches to measuring GDP can be found in the Guide to the UK National Accounts.

In producing a balanced estimate of GDP, we reconcile information on the output, expenditure and income measures of GDP. In our first quarterly estimate, output tends to paint a more reliable picture of what is happening overall in the economy, and so balancing adjustments are applied to the expenditure and income components of GDP where required to align to output; these tend to be applied to components where data content is comparatively weak, or estimates are prone to revision.

Data in chained volume measures 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.

Impact of the coronavirus (COVID-19)

This release captures the direct effects of the coronavirus (COVID-19) pandemic and the government measures taken to reduce transmission of the virus. We have faced an increased number of challenges in producing quarterly estimates of UK GDP for Quarter 3 (July to Sept) 2020. More detailed information on the challenges and the steps taken to mitigate those can be found in Coronavirus and the effects on UK GDP.

As a result of these challenges, GDP estimates for Quarter 3 2020 are subject to more uncertainty than usual and are likely to have larger than usual revisions in subsequent releases.

Additionally, as a result of the unprecedented impacts and interventions in the economy we have particular uncertainty around the income approach to measuring GDP in this release. For more information see Section 6: Income.

Nôl i'r tabl cynnwys

3. Headline GDP

Following two consecutive quarters of contraction, UK gross domestic product (GDP) is estimated to have grown by a record 15.5% in Quarter 3 (July to Sept) 2020. This is the largest quarterly expansion in the UK economy since Office for National Statistics (ONS) quarterly records began in 1955. However, it is worth noting that this reflects the continued easing of lockdown restrictions in the third quarter as well as some recovery of activity from the steep contraction in April (Figure 1).

The level of GDP in the UK is still 9.7% below where it was prior to the pandemic at the end of 2019. Compared with the same quarter a year ago, the UK economy fell by 9.6%.

The monthly path of GDP in Quarter 3 2020 reveals that there has been a slowdown of growth in August and September as momentum has eased through the quarter. GDP increased by 6.3% in July, driven by accommodation and food services as lockdown restrictions were eased.

Housebuilding activity also increased in July, while the reopening of car showrooms combined with pent-up demand boosted wholesale and retail trade and repair of motor vehicles. GDP grew by 2.2% in August, driven by accommodation and food services because of the combined impact of easing lockdown restrictions and the Eat Out to Help Out Scheme, as well as growth in the accommodation industry as international travel restrictions boosted domestic “staycations”.

In September, GDP further slowed to 1.1% where professional, scientific and technical activities had the largest contribution and legal activities, accounting and advertising saw strong growth after a muted August. Education also had a large positive contribution in September as schools made further advances in returning to a level of teaching similar to before the lockdown started on 23 March 2020, primarily through increased attendance.

Nominal GDP increased by 12.6% in Quarter 3 2020, its largest quarterly expansion on record. 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. This includes the price movements in private and government consumption, investment and the relative price of exports and imports. The implied deflator fell by 2.5% in the third quarter, the first quarterly decline since Quarter 4 (Oct to Dec) 2015. This primarily reflects movements in the implied price change of government consumption, which fell by 7.0% in Quarter 3 2020.

This decrease occurred because the volume of government activity in the third quarter increased at a much greater rate than nominal government expenditure. This is partly because of the unwinding in some of the movements that occurred in the second quarter, which saw a fall in the volume of government activity at the same time as an increase in government expenditure in nominal terms.

For example, there was a large increase in nominal government spending on health in the second quarter while the volume of government healthcare consumption fell. In the third quarter, nominal spending on health was largely unchanged, while volumes increased, which has impacted upon the growth rate of the implied deflator in the third quarter. In education, the large fall in the volume of education activity in the second quarter followed by the large increase in the third quarter help explain the most recent quarterly movement in the implied deflator.

Statistical guidance recommends measuring many aspects of government output directly, by counting activities, rather than by adjusting expenditure for price movements. Compared with the same quarter a year ago, the implied GDP deflator increased by 6.5%, an easing from the previous quarter.

Several countries have published first estimates of GDP for Quarter 3 2020, including the United States, Germany, France, Italy and Spain. These initial estimates show record rises in GDP in the third quarter of 2020 in all of these countries following record declines in the previous quarter. However, despite the record expansions in GDP in the third quarter, the level of GDP in each of these countries remains below where it was before the effects of the coronavirus (COVID-19) pandemic.

Considering the cumulative fall in GDP in the first three quarters of this year, of this group of countries, the UK experienced the largest drop. The UK economy is still 9.7% lower in Quarter 3 2020 compared with the end of 2019 (Figure 2). This is more than twice as large as the cumulative drop in GDP observed in Italy, Germany and France and nearly three times the size of the cumulative drop of 3.5% in the US.

It is important to note that the extent of these cumulative falls has not been uniform across countries, in part reflecting the spread of the virus in each country, the timing of lockdown measures and when these were lifted, as well as the voluntary forms of social distancing. They also likely reflect the structural features of these economies as some industries are more exposed to the response to the pandemic, such as those that involve interactions with other people.

Additionally, they might also reflect differences in how non-market output is measured in different countries, specifically the extent to which volume indicators are in place and how these have been affected by the pandemic. Consistent with international guidance, the Office for National Statistics (ONS) uses direct measures of the volume of activity to estimate the volume of non-market output such as health and education.

International comparisons should be made with care if the estimates being compared are based on different approaches to measuring the volume of non-market output.

Nôl i'r tabl cynnwys

4. Output

There have been record quarterly increases in services, production and construction output in Quarter 3 (July to Sept) 2020, mainly reflecting easing of lockdown restrictions and base effects from the steep contractions of the second quarter. Services output grew by 14.2% in Quarter 3 2020, while production output increased by 14.3%, and construction output expanded by 41.7% (Figure 3). However, the levels of output for these industries remain below those seen before the impact of the coronavirus (COVID-19), the extent of which varies within these industries.

Services

Following a record fall of 19.2% in Quarter 2 (Apr to June) 2020, services output grew by 14.2% in Quarter 3 2020. However, the level of services output in the third quarter was still around 10% lower than where it was at the end of 2019 (Figure 4). The September IHS Markit UK Service PMI states that growth in new business in September was softer compared with August because of “the withdrawal of the UK government's Eat Out to Help Out scheme, plus an introduction of some tighter restrictions on activity in September”.

The increase in services output in the third quarter was largely driven by 30.7% growth in wholesale and retail trade and repair of motor vehicles and motorcycles, which has now recovered output to above its Quarter 4 (Oct to Dec) 2019 level. This has mainly reflected the reopening of car showrooms and significant pent-up demand. There was also a recovery in retail trade in the third quarter because of strong growth in non-food stores and a record proportion of online sales.

Accommodation and food services also made a notable contribution to services growth, particularly in July and August because of the combined impact of easing restrictions and the Eat Out to Help Out scheme, which boosted consumer demand for restaurants and bars. Within accommodation, there was also a boost from domestic “staycations” in the third quarter. However, it is worth noting that output in accommodation and food services is still around 29% below its level in Quarter 4 2019. According to the latest Bank of England Agents’ Summary of Business Conditions, “demand for business travel, hotels, conferencing and corporate entertainment remained particularly weak” in Quarter 3 2020.

Other industries that contributed to the growth in services output include education, health and transportation and storage. For more information on health and education estimates in the third quarter of 2020, please refer to Section 5: Expenditure.

Figure 4: Services output grew by 14.2% in Quarter 3 2020, though the level of services output was still around 10% lower than where it was at the end of 2019

UK, Quarter 4 (Oct to Dec) 2019 to Quarter 3 (July to Sept) 2020

Embed code

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).
  2. Index is referenced to Quarter 4 (Oct to Dec) 2019.

Download the data

Production

Following a decline of 16.3% in the previous quarter, production output grew by 14.3% in Quarter 3 2020, reflecting an increase in all four production sub-industries. That said, production output remains 6.3% below its Quarter 4 2019 level (Figure 5). This is particularly the case in manufacturing, which is 8.1% below where it was in Quarter 4 2019.

Figure 5: Production output grew by 14.3% in Quarter 3 2020, though output remains 6.3% below its Quarter 4 2019 level

UK, Quarter 4 (Oct to Dec) 2019 to Quarter 3 (July to Sept) 2020

Embed code

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).
  2. Index is referenced to Quarter 4 (Oct to Dec) 2019.

Download the data

Manufacturing output grew by 18.7% in Quarter 3 2020, following a record decline of 21.1% in the second quarter. This reflects an increase in 12 out of the 13 manufacturing sub-sectors, most notably the manufacture of transport equipment, though output has still not recovered to the level seen before the impact of the coronavirus (Figure 6). This was partially offset by a fall in the manufacture of pharmaceutical products, though this decline mainly reflects a fallback from a general higher demand for pharmaceutical products in the second quarter.

Figure 6: Manufacturing output grew by 18.7% in Quarter 3 2020, though output has still not recovered to its pre-pandemic level

UK, Quarter 4 (Oct to Dec) 2019 to Quarter 3 (July to Sept) 2020

Embed code

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).
  2. Index is referenced to Quarter 4 (Oct to Dec) 2019.

Download the data

According to the Society of Motor Manufacturers and Traders (SMMT), UK car production in September 2020 was 5.0% lower in than the previous year. This was driven by production for export, which declined 9.7% compared with the previous year because of a fall in shipments to important overseas destinations including China, the EU and the United States.

Conversely, output for the domestic market grew by 14.5% compared with a year ago. Meanwhile, the latest Bank of England Agents’ Summary of Business Conditions stated that “automotive manufacturing picked up, especially for electric vehicles — but was still significantly below normal”. It also cited that output in the aviation industry was well below normal levels, “reflecting the drop in demand for commercial flights and less maintenance for existing fleet”.

Following a decline of 1.5% in Quarter 2 2020, mining and quarrying output grew by 1.3% in the third quarter of 2020. Output of electricity, gas, steam and air grew by 8.1% in Quarter 3 2020, reflecting increased demand following the reopening of factories and premises. Water supply and sewerage is the only production sub-industry to have recovered to above its early 2020 level, with an increase of 4.8% in the third quarter as a result of a general increase in commercial, industrial and construction waste activity.

Construction

In Quarter 3 2020, construction output increased by 41.7%. However, the level of construction output remains 11.5% below its level in Quarter 4 2019, following a 35.7% decline in the previous quarter. The quarterly expansion reflects increases in both new work and repair and maintenance following the reopening of construction sites after the easing of lockdown restrictions.

Private new housing was the largest contributor to growth in the third quarter. The IHS Markit UK Construction PMI reports that new orders increased at the quickest rate since February 2020 resulting from improved demand conditions for homebuilding and commercial projects. Meanwhile, the latest Bank of England Agent's Summary of Business Conditions noted that “housebuilding activity was also reported to have picked up, though mostly to complete projects, rather than start new ones”.

Nôl i'r tabl cynnwys

5. Expenditure

Following record contractions in Quarter 2 (Apr to June) 2020, there have been large increases in private consumption, government consumption, gross capital formation and imports in Quarter 3 (July to Sept) 2020 (Figure 7). However, the levels of expenditure remain considerably below their early 2020 levels before the impact of the coronavirus (COVID-19), as the pickup in business investment has been much weaker than private consumption.

Business investment is still 20.5% below where it was at the end of 2019, while household consumption remains 12.4% below where it was in Quarter 4 (Oct to Dec) 2019. This could be attributed to the higher levels of economic uncertainty having a more pronounced effect on the willingness of firms to undertake investment.

Private consumption

Household consumption increased by 18.3% in Quarter 3 2020, although it still remains 12.4% below where it was in Quarter 4 2019. The increase in the third quarter was driven by higher spending on restaurants and hotels and transport, the latter mainly a reflection of higher spending on motor cars and fuel. Other areas of increased spending such as clothing and footwear, miscellaneous goods and services and furniture and household equipment also made positive contributions in the third quarter.

Based on the limited data available at this stage, analysis by type of product shows that services made the largest contribution to growth in household consumption in Quarter 3 2020. Following a decline of 30.1% in Quarter 2 2020, household spending on services grew by 22.7% in the third quarter. This compares with growth of 38.6% in household spending on durable goods in Quarter 3 2020. Household spending on semi-durable goods grew by 19.9% in the third quarter while growth in household spending on non-durable goods was more muted at 2.6%.

The latest official retail sales figures show a 17.4% increase in the volume of retail sales in the three months to September 2020, the biggest quarterly increase on record. Of note, volume sales within non-store retailing were 36.6% higher in September compared with February, reflecting the ongoing shift to online shopping since the start of the pandemic.

The Quarter 3 2020 Bank of England Agents’ Summary of Business Conditions reported a recovery in sales of consumer goods, highlighting faster growth in online sales and that there was “strong demand for household goods, furniture and garden-related items” as well as strong demand for restaurants, which were supported by the Government’s Eat Out to Help Out scheme. The BRC Retail Sales Monitor added that “the sales of electronics, household goods and home office products have remained high” as office workers continued to work from home.

Following a large fall of 25.3% in the previous quarter, spending by non-profit institutions serving households (NPISH) increased by 7.3% in Quarter 3 2020, largely reflecting increased spending in the charity sector.

Consumption of government goods and services

Following a decline of 14.6% in the second quarter, the volume of government consumption increased by 7.8% in Quarter 3 2020. This is mainly a reflection of an increase in the volume of activity in health and education, which accounted for nearly 90% of the pickup in government consumption. It is worth noting that there is a higher degree of uncertainty surrounding the health and education estimates for the third quarter and as such these estimates might be more prone to revision than is typically the case.

In volume terms, healthcare consumption grew by 12.2% in the third quarter after having fallen by 30.3% in Quarter 2 2020. Within healthcare, elective surgery and GP services have shown strong recovery, while the volume of activity in other areas such as dental services remains low because patient capacity is reduced when following coronavirus safety protocols. Despite growth in the third quarter, the volume of healthcare consumption remains 25.2% below where it was at the end of 2019.

Meanwhile, the volume of education consumption increased by 22.5% in the third quarter following a fall of 24.5% in Quarter 2 2020. Schools reopened in September 2020 (August in Scotland), but attendance was lower than usual. We continue to include estimates for education delivered remotely to pupils learning at home. The volume of education consumption is still 17.3% below its level in Quarter 4 2019. This partly reflects reduced attendance, and partly reflects our approach to discount remote learning.

In line with international guidance we assume that education continues throughout the year. To measure education during Quarter 3, which includes the summer holiday, we adjusted our approach, accounting for the impact of the coronavirus. A path was interpolated from the end of Quarter 2 through to September. This approach is covered in more detail in a recently published blog.

Gross capital formation

There was an increase of 15.1% in gross fixed capital formation (GFCF) in the third quarter of 2020, following a decline of 21.6% in the previous quarter. The level of capital investment remains 10.6% lower than where it was in Quarter 4 2019. The largest contribution in Quarter 3 was dwellings investment which picked up by 71.2% as many of the UK’s large housebuilders returned to sites.

Business investment also made a large contribution to the increase, growing by 8.8% in Quarter 3 2020 after a fall of 26.5% in Quarter 2 2020, though business investment is still 20.5% below where it was at the end of 2019 (Figure 8). Growth in business investment in the third quarter was driven by increases in investment in buildings, ICT equipment and transport.

Respondent-led evidence suggests that many businesses continued to delay or cancel investment in the third quarter as a result of the coronavirus pandemic, with business responses far more likely to refer to investment decisions as paused (26%) rather than cancelled altogether (2%). This is echoed in the Quarter 3 2020 Bank of England Agents’ Summary of Business Conditions, which states that there were “widespread reports of investment being postponed or cancelled to preserve cash” because of uncertainty, with particular mention of the aviation, automotive and oil and gas industries.

The Decision Maker Panel noted that “71% of firms viewed overall economic uncertainty as high or very high in September”, adding that “investment was expected to be 21% lower in 2020 Q3”. The Quarter 3 2020 Deloitte CFO Survey found similar results, with 79% of chief financial officers (CFOs) rating the level of external financial and economic uncertainty to be high or very high.

Private sector dwellings grew by a record 68.5% in the third quarter of 2020. This largely reflects a return to work for construction industries following the relaxation of restrictions. Meanwhile, government investment fell by 1.9% in Quarter 3 2020 after growth of 19.3% in the second quarter.

Alignment and balancing adjustments are typically applied to the inventories component to help balance the different approaches to GDP – more detail on these can be found in the Quality and methodology section of this bulletin. Therefore, the unadjusted data provide a better understanding of the change in the inventory position of businesses. Here, the underlying data show a minor decrease of £58 million in stocks being held by UK companies in Quarter 3 2020 (Table 2). This partly reflects the impact of oil prices on the mining and quarrying, electricity and gas, and water supply industries. There is also survey evidence which suggests a decrease in inventories held in other industries such as motor trades.

Net trade

There were large falls in gross trade flows in the second quarter, which have recovered somewhat in the third quarter. The UK posted a trade surplus of 0.9% of nominal GDP in the third quarter of 2020, a narrowing from the 3.6% recorded in the second quarter (Figure 9). However, it should be noted that this figure is inclusive of precious metals. When these are excluded, the UK had a trade surplus of 2.5% of nominal GDP in the third quarter.

The narrowing of the trade surplus was mainly driven by movements in trade in goods where the 5.7% increase in goods exports was more than offset by a 18.6% increase in goods imports, as UK demand recovered in Quarter 3. The increase in goods exports was mainly driven by increases in machinery and transport equipment, reflecting an increase in exports of road vehicles, specifically cars. Demand for UK cars increased in the third quarter resulting from pent-up demand as dealerships reopened globally.

The increase in goods imports in the third quarter was also driven by increases in machinery and transport equipment, particularly cars. This is likely because of the reopening of some car dealerships as coronavirus restrictions eased from June onwards and the build-up of demand during this period.

Other factors that have also contributed include the new UK 70-plate, model upgrades and attractive offers for customers. There was also an increase in the import of miscellaneous manufactures, reflecting an increase in imports of clothing. This is likely because of the increased demand for online retail and pent-up demand following the easing of restrictions.

The recovery in the exports and imports of services has been much more muted, which might reflect how these have been more affected by some of the international restrictions in place. Services exports increased by 4.4.%, reflecting growth in intellectual property services and other business services, while trade in service imports fell slightly by 0.4%. It is worth noting that trade in services export and import volumes for most service types remain below the levels seen in early 2020, before the impact of the coronavirus.

External survey evidence points towards a recovery in export orders towards the end of the third quarter. The September IHS Markit UK Manufacturing PMI stated that “the ongoing reopening of many economies around the world from lockdowns and changes to COVID-19 restrictions boosted the export performance of the UK manufacturing sector in September”. However, the September CBI Industrial Trends Survey noted that despite a slight strengthening in export order books from their August levels, export order books “continue to be far below their long-run average”. According to Office for National Statistics (ONS) data, exports and imports of goods remain below their pre-pandemic levels.

Nôl i'r tabl cynnwys

6. Income

In Quarter 3 (July to Sept) 2020, nominal gross domestic product (GDP) increased by 12.6%, following a fall of 14.5% in Quarter 2. We previously referred to possible practical challenges in balancing GDP during the unprecedented impacts and interventions seen across the economy. In particular, within the income approach to measuring GDP there is more uncertainty than usual in Quarter 2 (Apr to June) and Quarter 3, as data content is lower during these periods than for the output and expenditure approaches to measuring GDP.

This in part reflects large government interventions in response to the pandemic in areas such as employment costs via the Coronavirus Job Retention Scheme (CJRS) subsidy to businesses and the Self-Employment Income Support Scheme (SEISS) payment to the self-employed. These schemes alongside various business grants, tax deferrals and the Value Added Tax (VAT) rate cut for the hospitality sector have all made the measurement of income more challenging over the latest two quarters.

Several data sources are forecast at this stage in the process and other data sources are not yet complete, leading to possible inconsistencies in treatment of the interventions between the components of income. For these reasons, rather than forcing a GDP balance for income by heavily adjusting the income components, we have decided to show the best estimate of each underlying component of income at this stage.

In doing so, this means that the alignment adjustment, used to align income to average GDP, is far larger than normal, as shown in Table 3. We felt that this both preserves the component level movements and shows the level of challenge and uncertainty currently within the income approach to GDP. The alignment adjustment is usually displayed as an “of which” for the total gross operating surplus (GOS) of corporations, but Table 3 shows the underlying level of GOS for corporations excluding this alignment adjustment. Work will continue before the GDP quarterly national accounts release to understand what is causing the relative weakness within the income approach to GDP. We will continue to review this over the coming months as and when more information becomes available.

Taxes less subsidies increased by 938.6% in the third quarter, reflecting the record high level of subsidies in the previous quarter. There was a quarterly fall in subsidies of 44.1%, mainly reflecting a reduction in the high levels of subsidy payments related to the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS) that took place in Quarter 2.

Following the fall in taxes recorded in the previous quarter, when there was a sharp fall in revenues from VAT, as well as from fuel, tobacco, stamp, and air passenger duties, there has been a small pickup in tax revenues in the third quarter. This was largely driven by an increase in revenue from hydrocarbon and tobacco duties.

There was an increase in compensation of employees (CoE) of 3.3% in the third quarter, following a 2.2% decline in Quarter 2. Growth in CoE was mainly driven by an increase in wages and salaries, reflecting the fact that more people returned to work from furlough. Meanwhile, employers’ social contributions grew by 2.8% in Quarter 3 2020, reflecting an increase in employers’ redundancy payments.

Following a 12.5% fall in the previous quarter, gross operating surplus (GOS) of corporations increased by 22.9% in Quarter 3 2020. However, this mainly reflects the alignment adjustment that is applied to this component for the purpose of balancing the income estimate of GDP for this quarter (Table 3). When the alignment adjustment is removed, GOS of corporations increased by 6.2%. In Quarter 3 2020, the EY UK profit warnings report noted that UK companies issued 58 profit warnings, and that in the year to September, 34% of firms issued a profit warning. In the travel and leisure sector, this figure reached 75% of firms. This reflects sales being below expectations, delayed or discontinued contracts, and increasing costs.

Nôl i'r tabl cynnwys

8. Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Gross domestic product (GDP) QMI.

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.

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) QMI analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations.

Reaching the 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 take the lead because of the larger data content.

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 in this release, have a target limit of plus or minus £2,000 million on any quarter. However, in periods where the data sources are particularly difficult to balance, larger alignment adjustments are sometimes needed.

To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where required (Table 4). They are applied to the individual components where data content is particularly weak in a given quarter because of a higher level of forecast content.

Figure 11 and Figure 12 highlight a general decline in response rates for surveys that feed into the GDP first quarterly estimate for Quarter 3 (July to Sept) 2020. We have undertaken a significant amount of work to ensure that the effect on the quality of our estimates is mitigated as much as possible.

This includes focusing resources on main respondents and industries, methodology reviews including but not limited to seasonal adjustment, forecast and imputation, and the use of additional sources of data (in quality assurance). More information on the measures taken can be found in Section 6 of Coronavirus and the effects on UK GDP.

More information on Monthly Business Survey response rates by industry is available.

Quarterly Stocks Survey temporary expansion

The Quarterly Stocks Survey (formerly Inquiry) is used in the compilation of the changes in inventories component. To address users’ concerns about the sample size of the survey and the potential impact on quality, we temporarily increased the sample size from 5,500 to 9,500 businesses for Quarter 2 (Apr to June) 2019. We have continued to boost the sample in subsequent quarters and will continue to do so until further notice.

Nôl i'r tabl cynnwys

Manylion cyswllt ar gyfer y Bwletin ystadegol

Ryan May
gdp@ons.gov.uk
Ffôn: +44(0)1633 455284