The second estimate of GDP quarterly growth was unchanged in the fourth quarter of 2012 contracting by 0.3% on the quarter but growing by 0.3% on the year.
Total production remained the main contributor (-0.3 percentage points) to the quarterly decline in GDP. In the second estimate, the sector was revised to a contraction of 1.9%. Construction was revised up in the latest estimate, growing by 0.9% and making a 0.1 percentage point contribution to GDP in the fourth quarter of 2012. However, this was offset by the services sector being revised down and contracting by 0.1%.
The decline in services sector output, while small, is only the fifth period of quarterly contraction in the last four years. After a total loss of 4.1% in output between the second quarter of 2008 and the first quarter of 2009, the services sector regained its pre-recession peak in the third quarter of 2012, while manufacturing and construction are still at least 10% lower. As the services sector accounts for over two-thirds of the UK economy, it has acted as a counterbalance to weaker growth in the construction and production sectors.
Since the beginning of the recession, a number of special events have affected the output of the UK economy (Special Events Calendar). In particular, the fourth quarter contraction is partly the result of special events in the second and third quarters of 2012. In the second quarter, the extra bank holiday for the Queen’s Diamond Jubilee and the particularly poor weather reduced output. Conversely, growth in the third quarter was likely to have been bolstered by the London 2012 Olympic and Paralympic Games. Accordingly, growth in the fourth quarter was reduced by the same amount.
In contrast to a fall in GDP, the headline indicators for the labour market in the fourth quarter of 2012 continued to show resilience. Compared with the previous quarter, the employment rate increased to 71.5%, unemployment remained at 7.8% and total hours worked increased by 1.8 million.
Average weekly earnings in terms of regular pay (excluding bonuses), which measures the money paid to employees before tax and other deductions, grew by 1.3% in the fourth quarter of 2012 compared with the same quarter in 2011. This was 0.6 percentage points lower than the 1.9% annual growth of regular pay in the previous quarter.
The growth in earnings (1.3%) was lower than Consumer Prices Index (CPI) inflation (2.7%) in the final quarter and therefore led to a decrease in real earnings. For the same level of income therefore, households will generally be able to buy fewer goods. The rate of the decline in real earnings had been slowing since the third quarter of 2011, but the most recent quarterly movements showed a divergence between earnings growth and price inflation and therefore increased the rate by which real earnings fell.
Source: Office for National Statistics
GDP: quarter on quarter growth, seasonally adjusted, Office for National Statistics (IHYQ)
Employment rate: aged 16 to 64, seasonally adjusted, Labour Force Survey, Office for National Statistics (LF24)
Unemployment rate: all aged 16 & over, seasonally adjusted, Labour Force Survey, Office for National Statistics (MGSX)
Total weekly hours: hours worked by people aged 16 years and over, seasonally adjusted, Labour Force Survey, Office for National Statistics (YBUS)
Average weekly earnings regular pay (excluding bonuses): seasonally adjusted, Office for National Statistics (KAI9)
CPI (overall index): percentage change on a year earlier, Office for National Statistics (D7G7)
GDP data is from "Second Estimate of GDP" published on the 27 February 2013.
Labour Market data is from the latest "Labour Market Statistical Bulletin" published on the 20 February 2013.
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