This is a short video looking at the preliminary GDP estimate for the first quarter of 2013.
The preliminary estimate of GDP is based on the output approach that is the value of all final goods and services produced within the UK.
We will show the change in the latest estimates in Q1 2013, and look at the quarterly and the annual change.
Gross Domestic Product, increased by 0.3 per cent in Q1 2013 compared with Q4 2012. While when compared with Q1 2012, GDP was 0.6 per cent higher.
We can look in more detail at the GDP estimates by showing the change in the four main sectors of the economy. Firstly, the services sector saw an increase of 0.6 per cent on the quarter, while the annual change showed an increase of 1.5 per cent. The production sector increased by 0.2 per cent compared with Q4 2012, but fell by 2.3 per cent on the year. The construction sector saw a decreased of 2.5 per cent this quarter, while comparing Q1 2013 with Q1 2012 construction output fell by 5.9 per cent. Finally, the agricultural sector decreased by 3.7 per cent this quarter and also saw a fall of 1.5 per cent on the year.
We can look at the contributions to the latest quarterly change in GDP from the four main sectors. As we showed last quarter, the relative size of the sectors impacts on their contribution to GDP growth. So, if the services sector and the construction sector, for example, increased by the same number of percentage points in a quarter, the services sector would contribute a greater percentage of the total increase in GDP due to its relative size.
Here is the 0.3 per cent increase in GDP on the quarter, and bringing on these bars, we can see that the agricultural sector had a slight negative contribution of 0.02 percentage points to GDP, while production had a similar positive contribution of 0.03 percentage points to GDP. The construction sector pulled GDP down by 0.17 percentage points, but this was more than compensated for by growth in the services sector, with a positive contribution of 0.47 percentage points. Putting all these together, you arrive at the total increase of 0.3 percentage points.
This month we will focus a little more on the service sector. First we can see how the sector has grown as a proportion of the total economy.
The service sector accounted for around 46 per cent of the UK economy in 1948, the earliest year for which the data is available. If we bring up this pie chart to show the relative size of the four sectors of the economy, in 1985 we can see that the services sector accounted for around 58 per cent of the UK economy, in 1995 this had increased to around 67 per cent and in the present day, as we saw earlier, the service sector now accounts for around 77 per cent of the UK economy.
Now if we look at changes in the service sector since the first quarter of 2008, the quarter before the start of the 2008/2009 recession.
The black line shows an index of 100 with the quarter we are comparing to being Q1 2008, referred to as the pre-recession peak. So when the line is below the hundred mark the sector was lower than in Q1 2008 and when it is above, the sector was higher.
Bringing on the line for total services we can see that the output of the service sector was declining throughout 2008 as the economy went into recession. Total service sector output then began to increase and within the last three quarters recovered all lost output, reaching and exceeding its pre-recession peak. Of note, however, is that in recent quarters, Q2 to Q4 2012, service sector growth was particularly affected by special events such as the Olympic and Paralympic games and Diamond Jubilee. This could account for the slight zigzag movements during this time.
If we fade out total services we can look at growth in the four main sub-sectors which make up total services.
Three of these have followed broadly similar paths since 2008, with the one exception being government and other services. However, this is to be expected during a recession as this particular sub-sector includes things such as automatic fiscal stabilisers like unemployment benefits where demand increases during a recession, as can be seen in 2009. Unemployment has remained at similar levels since then, so that demand has been maintained.
In the latest quarter, all sub-sectors experienced growth. Business services and finance increased by around 0.2 per cent. Transport, storage and communications grew by around 1.4 per cent on the quarter and distribution, hotels and catering increased by around 1.1 per cent. As a result they edged closer towards their pre-recession levels.