UK gross domestic product (GDP) in volume terms was estimated to have fallen by 0.2% in Quarter 2 (Apr to June) 2019, unrevised from the previous estimate.
When compared with the same quarter a year ago, UK GDP increased by 1.3% to Quarter 2 2019; down from 2.1% to Quarter 1 (Jan to Mar) 2019.
Services provided the only positive contribution to growth in the output approach to GDP, with growth slowing to 0.1% in the latest quarter.
Private consumption, government consumption and net trade contributed positively, while gross capital formation contributed negatively to GDP growth in Quarter 2 2019.
GDP was estimated to have increased by 1.4% between 2017 and 2018, unrevised from previous estimates; this was lower than the upwardly revised 1.9% growth seen between 2016 and 2017.
Data in this bulletin are consistent with our annual UK National Accounts, The Blue Book 2019 publication to be published on 31 October 2019; estimates therefore incorporate new data and methods throughout the time series.
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
The quarterly national accounts are typically published around 90 days after the end of the quarter. At this stage, the data content of this estimate from the output approach to GDP has risen since the first quarterly estimate to around 90% of the total required for the final output-based estimate. There is also around 90% data content available to produce estimates of GDP from the expenditure approach and around 70% data content from the income approach. Further information on all three approaches to measuring GDP can be found in the short guide to national accounts (PDF, 317KB).
Data in chained volume measures within this bulletin have had the effect of price changes removed (in other words, the data are deflated), with the exception of income data, which are only available in current prices.
Blue Book 2019
This release contains data that are consistent with the UK National Accounts, The Blue Book 2019, which will be released on 31 October 2019. As such, data for all periods within this release are subject to revision in line with the National Accounts Revisions Policy.
The Blue Book is the UK’s annual compendium of national accounts data and incorporates a number of improvements to methods and sources into the UK’s National Accounts. In Blue Book 2019 we have introduced a new framework to improve how we produce GDP in the UK, alongside a number of methodological improvements. These improvements will ensure that our national accounts continue to provide the best possible framework for analysing the UK economy and comparing it with other countries. Further detail on these changes is available in the Revisions to GDP section.
The reference year and last base year for all chained volume measure estimates remain as 2016.
International Financial Reporting Standards (IFRS16)
In January 2019, a new reporting standard took effect for those businesses using the International Financial Reporting Standards (IFRS) accountancy framework. This has impacted how some businesses have reported on their fixed assets, mainly through our Quarterly Acquisition and Disposal of Capital Assets Survey (QCAS), used in the compilation of gross fixed capital formation (GFCF) and business investment. While we recognise there is a change to the accounting standards for some businesses, there has been no change to national accounts standards on the treatment of leases.
To assess the impact of IFRS16’s introduction on GFCF and business investment estimates, we have contacted QCAS respondents with large movements in their data to ask them which accountancy framework they used and what, if any, impact IFRS16 had on their data.
As a result, we have made a downward adjustment of approximately £244 million to remove the quantified impact of its introduction in Quarter 1 (Jan to Mar) 2019 and a downward adjustment of £133 million in Quarter 2 (Apr to June) 2019 to better reflect underlying growth for GFCF and business investment. The asset most affected by the introduction of IFRS16 in Quarter 1 2019 was information and communication technology (ICT) equipment and other machinery and equipment. In our Quarter 2 2019 estimates, intellectual property products were the asset most affected. We will continue to monitor the impact of IFRS 16’s introduction in the future.
Quarterly Stocks Inquiry expansion for Quarter 2 and Quarter 3 2019
To address users’ concerns about the sample size of the Quarterly Stocks Inquiry and the potential impact on quality, we have temporarily increased the sample size from 5,500 to 9,500 businesses. We will assess at the end of the Quarter 3 (July to Sept) period the impact on its quality. The increased sample size will also help us better understand the impact of businesses’ preparations in relation to stockpiling ahead of the UK’s planned exit from the European Union on 31 October.
The inquiry is used in the compilation of the changes in inventories component within gross capital formation. Our early analyses have shown that the introduction of this increased sample has not caused any significant discontinuity in estimates of changes in inventories.Nôl i'r tabl cynnwys
UK gross domestic product (GDP) contracted by an unrevised 0.2% in Quarter 2 (Apr to June) 2019, having grown by an upwardly revised 0.6% in the first quarter of the year.
The UK economy grew by 1.3% compared with the same quarter in the previous year (Figure 1), a slowing from 2.1% in Quarter 1 (Jan to Mar) 2019.
GDP and some of its components have been particularly volatile through the year so far, largely reflecting changes in the timing of activity related to the UK’s original planned exit date from the European Union in late March. There is evidence that stockpiling and the change in timing of activity was taking place in the first quarter of the year, which likely provided a boost to GDP, with the latest figures suggesting that these increased stock levels were partly run down in Quarter 2 2019. Furthermore, it was also reported that a number of car manufacturers had brought forward their annual shutdowns to April as part of Brexit-related contingency planning.
There have been revisions to the quarterly path of real GDP throughout 2017 and 2018 (Figure 2). Annual GDP growth in 2017 is now estimated at 1.9%, revised up from 1.8%, whilst annual GDP growth in 2018 has been unrevised with slight revisions to the quarterly path. The profile of the quarterly path of real GDP so far in 2019 remains largely the same, although there has been a slight upward revision to the first quarter where GDP is estimated to have increased by 0.6%. This is still in line with the large movements likely reflecting changes in the timing of activity related to the UK’s original planned exit date from the European Union in late-March. For further information on the drivers and impacts of these revisions, please see the Revisions to GDP section of this publication.
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. In the year to Quarter 2 2019, the implied GDP deflator increased by 2.3% – upwardly revised by 0.4 percentage points, with revisions seen in government expenditure, gross capital formation and net trade deflators. Increases in the implied deflator are in part due to increases in fuel prices – particularly crude oil prices – which are in line with quarterly movements in CPI. For further information, please see the Revisions to GDP section of this publication.
Nominal GDP increased by 0.7% in Quarter 2 2019, revised upwards by 0.3 percentage points in part driven by revisions to the implied GDP deflator (Figure 3). In the first quarterly estimate of GDP the implied deflator was initially strong. Given data were provisional at this point we applied quality and balancing adjustments to some series, in part to help reconcile the three measures of GDP. Given we now have more certainty around this more mature dataset we have seen an upward revision to the implied deflator as a result of removing some of these adjustments applied in the first quarterly estimate of GDP.
There have also been revisions to nominal GDP growth throughout 2017, which to a large extent reflects the indicative balance in producing a revised estimate for 2017 that brings in line all three measures of GDP. Annual nominal GDP growth is now estimated to have increased by a revised 3.8% in 2017, slowing to an unrevised 3.3% in 2018.
|Chained volume measures||Current market prices|
Download this table Table 1: Headline economic indicators for the UK.xls .csv
The output measure of gross domestic product (GDP) fell by 0.2% in Quarter 2 (Apr to June) 2019, unrevised from the first quarterly estimate of GDP, following an increase of a revised 0.6% in the previous quarter.
Despite some revisions to the lower-level components of the output measure of GDP, the recent narrative remains similar. The decline in Quarter 2 2019 – most evident in the manufacturing industry – is likely to be in part reflecting changes in the timing of activity related to the UK’s original planned exit date from the European Union.
In Quarter 2 2019, production output fell by a downwardly revised 1.8% – the largest decline since Quarter 4 (Oct to Dec) 2012. This was driven by a revised 2.8% fall in manufacturing output, a more pronounced decline than previously estimated, reflecting the incorporation of new business survey data. This is likely to have reflected the effects of bringing forward activity in the first quarter of the year and the decline in car production as summer shutdowns for planned maintenance were brought forward to April. Despite increasing by an unrevised 0.1% in Quarter 2 – the weakest quarterly figure in three years – the services sector continued to provide the main positive contribution to overall GDP growth in the second quarter of 2019 (Figure 4).
There have been revisions to the components of the output measure of GDP through 2017 and 2018 (Figure 5). Services output is now estimated to have increased by 1.8% in 2017, revised down by 0.3 percentage points partially reflecting revisions to transport, storage and communications because of revisions in the information and communications sector. There has been a partially offsetting upward revision to 2.0% in 2018 because of revisions to government and other services. The revisions in 2017 and 2018 are mainly because of new rental price and volume data sources as well as updated VAT turnover data and seasonal factors reflecting the latest data.
Production and construction output growth has been revised down in 2017 and 2018, with the latest figures for 2018 now showing a relatively flat picture for these industries. For further information on the drivers of revisions see the Revisions to GDP section of this publication.
There has been a loss of momentum in the services industry over the last year (Figure 6). This has been particularly pronounced in other services, which reflects weakening in administration and support services, human health activities, education, real estate, and transportation and storage. The 0.1% increase in services output in Quarter 2 2019 is the weakest quarterly growth rate since Quarter 2 2016.
The slowdown is in line with the UK Services Purchasing Manager’s Index (PMI) (PDF, 183KB) for June 2019, which reported that the services industry was close to stagnation, linked to the “sluggish domestic economic conditions and greater risk aversion among clients in response to ongoing Brexit uncertainty”. The easing in the services sector has also been reflected in the recent CBI Service Sector Survey, which noted how “underlying activity and confidence is clearly subdued”.
The recent slowdown in services sector growth has been reflected in wholesale, retail and motor trades, where growth slowed to 0.1% in the second quarter of 2019, following an increase of 1.1% in the first quarter.
Growth in all three component industries – particularly in retail – weakened compared with the first three months of the year. The decline in wholesale reflected widespread falls across the industry, while official figures show that retail sales growth eased to 0.7% in Quarter 2 2019. External indicators for retail sales include the Bank of England’s Agents’ Summary Survey, which noted that the value of retail sales remained subdued in the second quarter, although there was a slight pick-up in consumer services, such as dining and leisure attractions, due to the mild weather and late timing of Easter.
The main positive contribution to services sector growth came from the transport, storage and communications industries, in which output increased by 0.6% in Quarter 2 2019. This was driven by growth in the information and communication sector because of continued strength in computer programming. Financial and insurance activities output fell 0.4% in Quarter 2 2019, continuing the decline seen since Quarter 2 2018, although users should note that early estimates are reliant on a higher level of forecast content. This weakness is reflected in the Bank of England’s Agents’ Summary Survey, which attributes the weaker demand for professional services – which includes financial services – to the recent political uncertainty.
The relative volatility throughout 2019 in the UK economy has been particularly pronounced in the production industry, which increased by 1.1% in Quarter 1 2019, and fell by 1.8% in Quarter 2 2019 (Figure 7).
Manufacturing was the main driver behind this volatility in production, with the pick-up in Quarter 1 being consistent with activity being brought forward ahead of the UK’s original intended EU departure date. The second quarter of 2019 saw a reversal of this with manufacturing output falling by 2.8%. This was in part an unwinding from the increase seen in Quarter 1, and partly as a result of a decline in car production as a result of car production plants bringing forward their summer shut-downs.
This effect was also reflected in the Markit UK Manufacturing PMI (PDF, 148KB) for June 2019, which reported that manufacturing output contracted at the fastest pace since October 2012. The fall in Manufacturing PMI in June 2019 was the third consecutive month of decline, attributed to a combination of factors including high stock levels and ongoing Brexit uncertainty. Furthermore, the Bank of England’s Agents’ Summary Survey reported that growth in manufacturing goods exports in the second quarter was weak, with businesses stating that “they had lost, or were concerned about losing, sales to overseas competitors as European customers reassessed their supply chains.”
The fall in car production seen in Quarter 2 2019 was echoed in the recent Society of Motor Manufacturers and Traders survey, which reported that UK car production fell by 20% in the first six months of the year, attributed mainly to “falling demand in key markets, including the UK, exacerbated by factory shutdowns pulled forward in anticipation of the March Brexit deadline”. In addition, the recent CBI Industrial Trends Survey also recorded a fall in manufacturing output in the three months to June 2019. This was driven by the largest contraction in motor vehicle production since March 2009, because of the “bringing forward of planned seasonal plant closures to align with previous Brexit deadlines”.
Mining and quarrying output fell by 1.1% in the second quarter of 2019, driven by scheduled maintenance in a number of oil and gas fields. In contrast, electricity, gas, steam and air conditioning as well as water supply and sewerage production grew by 2.8% and 1.3% respectively in the second quarter.
Construction output decreased by 1.2% in Quarter 2 2019, following growth of 1.6% in the first quarter of 2019. The quarterly fall was due primarily to a decline in repair and maintenance work. According to the Construction Purchasing Managers’ Index (PDF, 174KB) for June, construction output fell at the steepest rate since April 2009, reflecting mainly “heightened political and economic uncertainty”. However, public housing new work made a positive contribution, reflected in the latest Bank of England’s Agents’ Summary Survey where it was reported that “growth in social and affordable housing remained stronger” despite weaker housing market activity. For further information on the methodological revisions to construction output, please see the Revisions to GDP section of this publication.Nôl i'r tabl cynnwys
The expenditure approach to measuring gross domestic product (GDP) contracted by an unrevised 0.2% in Quarter 2 (Apr to June) 2019.
Whilst there have been revisions to the expenditure contributions for the latest quarter, the recent narrative around the large movements in net trade and gross capital formation in the first two quarters of 2019 remains relatively unchanged. Trade imports and exports have been volatile this year, in part reflecting the effects of movements of unspecified goods – which include non-monetary gold – in the first two quarters of the year. There has also been a reversal in the contribution of gross capital formation (GCF) in Quarter 2, reflecting to a large extent the pronounced building up of stocks in the run-up to the UK’s original exit date from the European Union at the end of March. This decline in the contribution from GCF also reflects movements in valuables offsetting changes in the trade of non-monetary gold.
Private consumption – which consists of household expenditure and non-profit institutions serving households (NPISH) – and government consumption continued to contribute positively to GDP growth in Quarter 2 2019 (Figure 8).
There have been some revisions to the quarterly path of components of the expenditure measure of GDP throughout 2017 and 2018. Whilst the overall cumulative contribution of these revisions and their net impact on real GDP growth from Quarter 1 2017 onwards is broadly offsetting, there have been some revisions to the composition of demand over this period (Figure 9).
The latest estimates show that private consumption is now estimated to be weaker in recent periods, while there has been less external rebalancing than previously estimated – instead, net trade has provided a negative net contribution over these periods. These have been offset by an increase in gross capital formation over this period. The revisions to the expenditure components reflect primarily later survey returns, updated source data and methods changes introduced as part of Blue Book 2019. For further information on the drivers and impacts of these revisions, please see the Revisions to GDP section of this publication.
Household consumption has been revised down in the first two quarters of 2019, which is more in line with some external indicators that point to a more subdued picture. Growth in household consumption has been revised down by 0.3 percentage points in Quarter 1 2019 and by 0.2 percentage points in Quarter 2 2019, due primarily to actual data replacing forecasts.
External evidence suggests that consumer spending remains relatively subdued, with the GfK Consumer Confidence index falling back in June 2019, which was attributed to consumers’ continued concern over the wider economy coupled with falls in personal finance. The 0.4% increase in household consumption in Quarter 2 2019 in part reflects a 0.9% increase in expenditure on housing. Household spending includes all expenditure made by households that are resident in the UK, irrespective of where the spending takes place. As such, it is necessary to add spending that happens in the UK by non-residents and subtract spending that takes place outside of the UK by UK residents.
The latest revised figures show that annual growth in household consumption slowed to 1.6% in 2018, having increased by 3.8% in 2016 and 2.3% in 2017. Growth in expenditure on miscellaneous goods – which includes financial services – slowed notably, but still made the largest positive contribution to household consumption growth in 2018. In addition, there has also been a notable slowing in household expenditure on recreation and culture as well as on food and drink. In contrast, household spending on housing, and household goods and services increased relative to 2018 (Figure 10).
Government consumption expenditure estimates have been upwardly revised in the most recent quarter. In Quarter 2 2019, government expenditure increased by 1.1% – upwardly revised by 0.4 percentage points – most notably in health and education. First estimates of central government expenditure in a new financial year are provisional, as detailed outturn data are not yet available from all departments and devolved administrations at that point in time. This release includes a full first quarter of outturn data for the new financial year, reflecting updated estimates for the sector.
Despite some small revisions to import growth in the first two quarters of 2019, the recent narrative around movements in unspecified goods – which include non-monetary gold (NMG) – remains unchanged. There have been some notable movements in imports of unspecified goods in the second quarter of 2019, broadly representing a reversal in activity from the first quarter of 2019. These movements do not affect headline GDP as they are recorded as equivalent offsetting impacts in the UK National Accounts, but they are reflected in the composition of GDP growth. More information on how non-monetary gold features in GDP is available.
However, there have been notable revisions to the volume of exports of goods and services. For goods, this reflects updated source data from HM Revenue and Customs (HMRC) and updated methodology for converting data from a physical movement of goods basis to an economic ownership basis, and for services this reflects later survey returns. It is now estimated that there was a 6.6% fall in exports in Quarter 2 2019 – which has been downwardly revised by 3.2 percentage points –due partially to revised HMRC data indicating falls in unspecified goods, and machinery and transport equipment. This is consistent with a range of external evidence, including the recent British Chamber of Commerce Quarterly Economic Survey, which recorded how the number of firms reporting an increase in export sales fell to a three-year low.
This helps explain why the UK trade deficit has been revised to 2.1% of nominal GDP in Quarter 2 2019, which was previously estimated as 0.8% of nominal GDP, following a significant widening in Quarter 1 where it reached 4.2% (Figure 11). That said, these figures were explained in part by large flows of unspecified goods in the first three months of the year in which the volume of imports increased by 10.3%. The narrowing of the trade deficit in Quarter 2 reflects a notable 13.0% decline in imports, with falls in imports of unspecified goods as well as transport equipment and chemicals.
GCF – which includes gross fixed capital formation (GFCF), changes in inventories and acquisitions less disposal of valuables – declined 15.6% in Quarter 2 2019. This largely reflects a fallback from Quarter 1 2019, where GCF was boosted by the build-up of stocks held by some businesses ahead of the UK’s original exit date from the European Union at the end of March 2019, alongside notable movements in unspecified goods – which includes non-monetary gold – which fall within the valuables component of GCF. In Quarter 2 2019, changes in inventories (including both balancing and alignment adjustments) subtracted 1.19 percentage points from GDP growth (Figure 12).
Alignment adjustments 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. When these adjustments are removed, the underlying data show a substantial decrease of approximately £4.2 billion in stocks being held by UK companies in the most recent quarter (Table 2). Falls in stock levels are seen across all manufacturing industries with the exception of materials and fuels, and mining and quarrying.
|Change in Inventories|
|2017 Q1||Current price||3148||1863||1000||285|
|Chained volume measure||-577||1833||1000||-3410|
|2017 Q2||Current price||581||-1967||-1000||3548|
|Chained volume measure||-2232||-1937||-1000||705|
|2017 Q3||Current price||266||-349||-||615|
|Chained volume measure||-2784||-342||-||-2442|
|2017 Q4||Current price||732||453||-||279|
|Chained volume measure||-3381||446||-||-3827|
|2018 Q1||Current price||-2239||-2600||500||-139|
|Chained volume measure||-4062||-2516||-1000||-546|
|2018 Q2||Current price||2644||1841||-||803|
|Chained volume measure||549||1781||1500||-2732|
|2018 Q3||Current price||801||-22||-1000||1823|
|Chained volume measure||-2358||-17||-1000||-1341|
|2018 Q4||Current price||3122||781||1000||1341|
|Chained volume measure||1030||752||1000||-722|
|2019 Q1||Current price||5021||-1766||-500||7287|
|Chained volume measure||5530||-1679||-500||7709|
|2019 Q2||Current price||2367||2131||-||236|
|Chained volume measure||-705||2012||1500||-4217|
Download this table Table 2: Change in inventories, including and excluding balancing and alignment adjustments.xls .csv
GFCF decreased by an unrevised 0.9% in the second quarter of 2019, in part reflecting a 3.6% fall in government investment. This was driven by widespread falls, although users should note that both government consumption and investment figures are based on the latest available budgetary information provided by government departments including HM Treasury and local government. These estimates may be subject to revision when outturn data become available.
Business investment also fell by 0.4% in the latest quarter, in line with its recent trend of late, in which there were four consecutive quarters of decline throughout 2018. Previous analysis has highlighted how business investment has been subdued compared with comparative points in previous cycles, as external evidence has pointed to the effects of heightened economic uncertainty. Figure 13 shows that there have been downward revisions to the quarterly path of business investment estimates, reinforcing the narrative from external commentators that uncertainty is likely to be weighing on capital spending by firms.
The fall in the latest quarter was driven by declines in investment in information and communication technology (ICT) equipment and other machinery and equipment. The fall in business investment in Quarter 2 2019 is consistent with a variety of external evidence, including the recent Deloitte CFO Survey, which recorded continued corporate caution caused by high-risk aversion amongst businesses centred around the recent political uncertainty. In addition, the Bank of England’s Agents’ Summary for Quarter 2 2019 recorded the lowest score for investment intentions since January 2010, with the majority of contacts reporting that “they did not view the extension of the EU withdrawal period as an opportunity to unlock investment”.
These figures should be interpreted with some caution as early estimates of business investment can be prone to revision. Furthermore, it should be noted that these estimates are subject to higher levels of uncertainty in this release, reflecting the introduction of International Financial Reporting Standard (IFRS) 16 Leases in January 2019 – further information can be found in the Things you need to know about this release section.Nôl i'r tabl cynnwys
Nominal gross domestic product (GDP) increased by 0.7% in Quarter 2 (Apr to June) 2019, an upward revision of 0.3 percentage points. This reflects upward revisions to gross operating surplus and compensation of employees, reflecting primarily actual data replacing forecasts. This represents a slowing in nominal GDP growth following an increase of 1.2% in the first quarter of 2019 (Figure 14).
Compensation of employees increased by 1.5% in Quarter 2 2019, an upward revision of 0.2 percentage points caused by actual data replacing forecasts, picking up from the 0.3% recorded in the first quarter. The growth in the second quarter was driven by wages and salaries, which grew 1.1%, as well as employers’ social contributions, which grew 3.8%. According to the Bank of England’s Agents’ Summary Survey, wage growth in consumer services in Quarter 2 2019 was mainly caused by increase in the National Living Wage. More information on growth in wages and salaries can be found in the recent Labour market overview, UK: August 2019.
Gross operating surplus fell by 0.9% in Quarter 2 2019, an upward revision of 2.3 percentage points, primarily reflecting revisions to imputed rental data. This represents a notable drop from the 3.6% growth recorded in the first quarter. There have been large revisions to mixed income through 2017 and 2018, which primarily relates to the income of the self-employed. These revisions reflect updated source data and methodological improvements. More information can be found in the Revisions to GDP section. Mixed income continued to grow in the second quarter of 2019, albeit at a reduced pace, increasing by a revised 0.5%. This marks a slowing from the 3.8% growth recorded in the first quarter.Nôl i'r tabl cynnwys
In this Blue Book 2019-consistent dataset, a number of methodological changes have been made and improved source data have been used, in addition to revisions caused by taking on updated source data as would happen in all quarterly national accounts releases. Further details about the main changes affecting this release are provided in this section, along with analysis of the revisions to each quarter from 2017 onwards.
A new framework for GDP
We have made considerable progress in improving how we compile estimates of gross domestic product (GDP), where we have used a new framework to inform headline GDP estimates. This involves confronting the estimates from the three approaches to measuring GDP using the supply and use tables (SUTs) framework for both current price and volume estimates of GDP. This includes progress in:
- incorporating a wider set of more appropriate available product deflators for each transaction, confronting these at a detailed product level for the first time
- full integration of the institutional sectors into the balancing process of the SUTs framework
- improving our estimates of current price GDP by using new data sources to give information on the diversification of the services economy and the costs incurred by businesses
New, improved data sources in the form of the Annual Survey of Goods and Services and the Annual Purchases Survey have also been used to improve the quality of current price estimates. These surveys have helped provide new insights on the diversification of the services economy and the costs incurred by businesses in their production process.
Further information appears in National Accounts articles: Blue Book 2019 impacts on GDP current price and chained volume measure estimates: 1997 to 2016, published on 20 August 2019.
Methodological improvements in Blue Book 2019
There have been a number of methodological changes incorporated in the national accounts in Blue Book 2019 including:
- improvements to the estimation of capital stocks and the consumption of fixed capital
- improvements to the non-profit institutions serving households (NPISH) sector
- further development of UK trade data
- improvements to the measurement of gross fixed capital formation and business investment
- improved recording of Value Added Tax (VAT) refunds data for the National Health Service, academies, the British Broadcasting Corporation and police commissioners
- the change in inventories component is now calculated on an industry by product basis allowing a more accurate estimate to be produced in a supply and use tables (SUTs) framework, additionally deflation is now carried out on a product by asset basis for the first time, instead of at industry level
The impact of the improvements to construction output estimates resulting from the new imputation methodology and bias adjustment implemented in June 2018, can now be seen for the period before 2017 (further detail can be found in Section 6 of the impact of improvements to construction statistics article).
Further revisions across the whole period can also be seen as a result of:
- late responses to surveys replacing imputations, or revisions to original returns
- revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually
- HM Revenue and Customs (HMRC) Value Added Tax (VAT) returns replacing Monthly Business Survey (MBS) data for small- and medium-sized businesses for Quarter 4 (Oct to Dec) 2018 and Quarter 1 (Jan to Mar) 2019 as well as potential revisions to previous VAT turnover data
- revisions to the input series for the construction output price indices
VAT turnover data
Value Added Tax (VAT) turnover data for Quarter 4 (Oct to Dec) 2018 and Quarter 1 (Jan to Mar) 2019 and revisions for earlier periods have been incorporated into the compilation of the output approach to measuring GDP. This data source replaces estimates initially gathered from the Monthly Business Survey (MBS) for some industries. VAT has only been used to estimate growth rates, with the overall level of output still derived from the Annual Business Survey and other annual benchmark sources.
Mixed income and gross operating surplus (GOS)
Revisions to mixed income reflect updated data sources and processing of component level data. Previously, the most up to date estimates of Mixed Income solely used labour market measures of self-employment and employee wage growth to measure self-employed income. The new methodology reflects movements in the different incomes streams of the self-employed including unincorporated company and rental incomes.
Improved processing systems have been implemented for estimates of gross operating surplus, these have led to better alignment with HMRC benchmarks and improved seasonal adjustment.
Imputed and actual rental
Price and volume data sources used to estimate actual and imputed rental have been updated, replacing forecasts previously used from 2016 onwards. The quarter-on-quarter growth in price of private rentals (sourced from the Valuation Office Agency) fell during 2016 and 2017 as reported in the Index of Private Housing Rental Prices, UK. This has led to downward revisions to rental data, which has impacted on all three approaches to measuring GDP.
Table 3 provides the revisions to headline GDP for each quarter within the quarterly tail.
|Average GDP in chained volume measures||0.2||0.0||-0.2||0.0||0.0||0.1||-0.1||0.1||0.1||0.0|
|Non-profit institutions serving households||1.1||0.6||0.3||0.8||0.9||-0.2||0.8||0.3||0.6||-0.5|
|Gross capital formation||0.7||1.0||0.1||1.0||-2.0||2.3||-5.4||3.0||1.1||4.3|
|Average GDP in current prices||0.0||0.0||-0.7||0.4||-0.2||0.2||0.1||-0.2||0.3||0.3|
|Compensation of employees||0.0||0.1||0.4||-0.3||0.1||0.0||-0.1||0.6||-0.1||0.2|
|Gross operating surplus of corporations||1.6||0.7||-3.5||2.3||0.0||0.6||1.7||-2.9||1.0||2.3|
Download this table Table 3: Revisions to quarter-on-quarter growth for components of GDP.xls .csv
Quarter 1 2017
GDP in volume terms has been revised upwards by 0.2 percentage points from the previous estimate of 0.4%. This aligns average GDP growth with growth in the output approach to measuring GDP, with upward revisions to government expenditure, gross capital formation (GCF) and trade exports in the expenditure approach and gross operating surplus of corporations in the income approach.
Quarter 2 2017
Both nominal and GDP in volume terms are unrevised. Upward revisions to imports and exports of goods arise from updated source data from HMRC and updated methodology for converting data from a physical movement of goods basis to an economic ownership basis. For imports and exports of services revisions reflect methodological changes introduced as part of the annual Blue Book process.
Quarter 3 2017
GDP in volume terms has been revised down by 0.2 percentage points from the previous estimate of 0.5%. Production, construction and services output have been revised downwards, with a revision of 0.6 percentage points to estimates of construction output resulting from changes to nominal data as well as revised seasonal adjustment factors.
Quarter 4 2017
GDP is unrevised in volume terms, while nominal GDP has been revised up by 0.4 percentage points. In the income approach to measuring GDP we see an upward revision of 2.3 percentage points to gross operating surplus of corporations. This can be attributed to better alignment with HM Revenue and Customs (HMRC) benchmarks and improved seasonal adjustment factors.
Quarter 1 2018
GDP is unrevised in volume terms, with a 0.2 percentage points downward revision to nominal GDP estimates. There have been revisions across a number of expenditure components in nominal terms, which have led to this revision.
Quarter 2 2018
In volume terms, GDP has been revised upwards by 0.1 percentage points. Services output was revised upwards by 0.2 percentage points, with upward revisions across all four services sectors resulting from revisions to VAT turnover data and Monthly Business Survey estimates incorporated in this release.
Quarter 3 2018
GDP in volume terms has been revised downwards by 0.1 percentage points. There was a notable downward revision of 5.4 percentage points to gross capital formation estimates. This was in part driven by broad-based revisions to the change in inventories estimates resulting from late data being taken on for the quarterly stocks inquiry from Quarter 2 2018 onwards, along with rebalancing and new seasonal adjustment factors.
Quarter 4 2018
In volume terms, GDP has been revised upwards by 0.1 percentage points. We have seen an upward revision resulting from the use of VAT turnover data in the measurement of services, production and construction output for the first time. VAT turnover data replaces the Monthly Business Survey once available, helping to improve the coverage and quality of our output estimates.
Quarter 1 2019
GDP in volume terms has been revised upwards by 0.1 percentage points. This output-led revision can be attributed to the incorporation of VAT turnover data in the national accounts for this quarter for the first time. This had led to an upward revision to construction output of 0.2 percentage points and an upward revision to services output (to less than one decimal place).
Quarter 2 2019
GDP is unrevised in volume terms but revised upwards by 0.3 percentage points in nominal terms. This upwards revision can be in part attributed to the GDP implied deflator, where improved data sources become available for this period replacing forecasts for estimates of trade, government expenditure and gross capital formation.Nôl i'r tabl cynnwys
Download this table Table 4: International GDP growth rate comparisons.xls .csv
Within our international comparison, the UK and Germany were the only two countries to see negative growth in Quarter 2 (Apr to June) 2019. This is the first time the UK has experienced negative growth since Quarter 4 (Oct to Dec) 2012. Whereas for Germany, this growth level is the same as that in Quarter 3 (July to Sept) 2018. Italy’s economy did not see any growth in Quarter 2 2019.
The strongest growth seen in the last quarter was 0.9% in Canada. European Union (EU28) economies grew by an average of 0.2% in Quarter 2 2019, the weakest growth seen since Quarter 1 (Jan to Mar) 2016.
G7 countries saw an average 0.3% growth in Quarter 2 2019, the same growth rate as in Quarter 4 2018. Most G7 countries are above their pre-economic downturn peaks, the exception being Italy where GDP remains 5.1% below the pre-downturn peak (Quarter 1 2008). The United States is still showing the biggest recovery over this period, up 21.4% since the downturn. Canada is showing the second-largest recovery, up 20.4% over the period.
The estimates quoted in this international comparison section are the latest available estimates at the time of preparation of this statistical bulletin and may have subsequently been revised. The data are gathered from the Organisation for Economic Co-operation and Development’s website excluding the data from the UK, which is compiled by the Office for National Statistics.Nôl i'r tabl cynnwys
The Gross domestic product (GDP) Quality and Methodology Information report contains important information on:
- the strengths and limitations of the data and how it compares with related data
- uses and users of the data
- how the output was created
- the quality of the output including the accuracy of the data
The national accounts are drawn together using data from many different sources. This ensures that the national accounts 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 Quality and Methodology Information report 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 takes the lead due to its 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 quarterly national accounts 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; this has been the case in Quarter 1 (Jan to Mar) 2018 and Quarter 2 (Apr to June) 2019 for expenditure. To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where required. 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. The balancing adjustments applied in this quarter are shown in Table 5, the resulting series should be considered accordingly.
|GDP measurement approach and|
component adjustment applied to
Trade in Services (exports)
|Chained volume measure||-||-||-||-||250||400||500||500||-800||-|
|Trade in Services (imports)||Current prices||-||-||-||-||-400||650||-||-||700||-|
|Chained volume measure||-||-||-||-||-||-850||-250||-250||700||-|
|Change in inventories||Current prices||1000||-1000||-||-||500||-||-1000||1000||-500||-|
|Chained volume measure||1000||-1000||-||-||-1000||1500||-1000||1000||-500||1500|
Private non-financial corporations
gross operating surplus
gross operating surplus
Download this table Table 5: Balancing adjustments applied to the Quarterly National Accounts dataset.xls .csv
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