GDP revisions in Blue Book: 2021

• Revisions to estimates of gross domestic product (GDP) published in the annual Blue Book 2021 are in line with recent historical Blue Book revisions - there was a mean absolute revision (MAR) of 0.12 percentage points in Blue Book 2021.

• Heightened levels of uncertainty have led to higher data revisions in 2020 - revisions have ranged from negative 0.9 to positive 1.9 percentage points for these quarters, although the size of the quarterly movements needs to be considered.

• The G7 countries have tended to revise up their first estimates of GDP over the course of the coronavirus (COVID-19) pandemic, where comparisons of revisions in part reflect measurement challenges and the revisions policies of countries.

There is a trade-off between the timeliness and accuracy of estimates of gross domestic product (GDP). As additional information becomes available, we have a more complete picture of economic activity in that period. This production cycle can take up to three years and leads to revisions in our estimates of GDP. The annual Blue Book process is also when major methodological improvements are introduced in a consistent and co-ordinated way.

To assess revision performance of our GDP estimates, we can estimate:

• the mean revision (MR), which shows whether there is a systematic tendency for initial estimates to be revised upwards or downwards

• the mean absolute revision (MAR), which measures the absolute size of revisions so that upward revisions are not offset by downward revisions of the same magnitude

• the mean square revision (MSR), which incorporates the degree of bias and the variance of the revision, as large revisions are treated more seriously than small revisions

This article analyses the revisions that were published in our Blue Book 2021 publication. It then looks at the international experience of GDP revisions over the course of 2020 and 2021.

Figure 1 shows the revisions to volume estimates of quarterly gross domestic product (GDP) in recent Blue Books. We look at the revisions to quarterly GDP between the two relevant vintages, picking up the impact of that Blue Book.

For example, the latest Blue Book revisions for 2021 reflect those between the August 2021 and September 2021 vintages. There was a mean absolute revision (MAR) of 0.12 percentage points in Blue Book 2021, in line with the average revision of Blue Books published since 2004.

There is a zero mean revision (MR) at T+3 months, implying that there is no tendency for the first quarterly estimate to be revised up or down. The MR is a little higher when comparing the first published quarterly estimate with the estimate published three years later. However, the initial revisions (T+3 months) and those that tend to reflect the incorporation of annual benchmarks and balancing in a supply and use tables (SUTs) framework are not statistically significant (Table 1).

The MR is largely similar for a range of more mature estimates, although there is a more marked increase in the MAR in later vintages. This likely reflects the impact of balancing our full range of information in a (SUTs) framework for the first time and methodological improvements, which cannot be anticipated at the time of the first estimate.

Figure 2 shows that the quality of early quarterly estimates has improved over time, which likely reflects cyclical and structural factors. There have been improvements to the measurement of GDP as well as a lower degree of volatility in the UK economy. The period excludes the coronavirus (COVID-19) experience for 2020 and 2021 as we do not have fully mature estimates yet and so this is still subject to further revisions once we obtain more detailed annual data. We will cover this in future updates.

Figure 3 shows that the earlier periods were inherently more volatile for the UK economy relative to the most recent periods, which has also coincided with there being lower revisions of late.

We have not been able to include the effects of the pandemic on these revisions, as we do not yet have "final" quarterly estimates of volume GDP between 2020 and 2021 - we take this to be the one published three years after the first quarterly estimate. However, Figure 4 shows some indicative insights into these effects, comparing the revision between the first estimate and that published one year later. It covers up to Quarter 4 (Oct to Dec) 2020, reflecting some of the balancing challenges so far. This shows that the revisions have been much larger for 2020 - revisions have ranged from negative 0.9 to positive 1.9 percentage points for these four quarters, although the size of the quarterly movements needs to be considered.

We have provided information around possible reasons for there to be increased uncertainty in the early estimates of gross domestic product (GDP), including measurement challenges around new government interventions and non-market output.

Figure 5 shows where levels of volume of GDP are compared with the pre-coronavirus (COVID-19) pandemic levels of GDP, comparing the latest estimate with what it would have been had there been no revisions. This is only to provide an indicative insight into the "final" revision.

It reinforces how there has been a tendency for first estimates of GDP to be revised up - Germany, Japan and the UK are now closer to having recovered back to their Quarter 4 (Oct to Dec) 2019 levels, while there has been a stronger recovery in the United States than the first estimates would have implied. France is now estimated to have surpassed its pre-pandemic levels.

This might only be an indicative picture of the revisions performance, given that each country will be at different points in their revisions policy. For example, some countries might be storing up any revisions until their first supply and use tables (SUTs) balancing process, whereas others might have incorporated their revisions on a more continuous real-time basis. There have been challenges in making international comparisons of GDP, in particular the treatment of non-market output, which explains some of the revisions to UK GDP.

We expect further data revisions to these international estimates of GDP for 2020 and 2021 over the coming years, so there might be further changes in the relative profiles of country's GDP revisions. We will continue to communicate these GDP revisions and any wider impacts on uncertainty in our regular releases.

Gross domestic product (GDP)

A measure of the economic activity produced by a country or region. There are three approaches used to measure GDP:

• the output approach

• the expenditure approach

• the income approach

A more detailed glossary is available.

More information about strengths and limitations of national accounts data used in the Blue Book can be found in our GDP Quality and Methodology Information.