GDP is an estimate of total economic activity in the UK. It is constructed by balancing the estimates from the output, income and expenditure approaches to measuring GDP which in theory are all equal. For more information on how GDP is balanced see ‘Balancing GDP’ in the background notes section of this release.
Data in this release, unless otherwise stated, will have been seasonally adjusted with seasonal effects removed to allow comparisons over time. Estimates are given in chained volume measures (CVM), sometimes known as real terms, with the effects of inflation removed or current prices (CP), sometimes known as nominal terms, without any adjustment for inflation.
Growth for GDP and its components is given between different periods. Latest year on previous year gives the annual growth between one calendar year and the previous. Latest quarter on previous quarter growth gives growth between one quarter and the quarter immediately before it. Latest quarter on corresponding quarter of previous year shows the growth between one quarter and the same quarter a year ago.
This bulletin contains information on the third estimate of GDP for Q1 2013. It includes revisions to and more detail on the output, expenditure and income approaches to GDP. Also included are data on the institutional sector accounts, including the households’ saving ratio and real household disposable income.
|Gross Domestic Product|
|Households' saving ratio||Real households' disposable income||Current market prices||Chained volume measure||Chained volume measure|
Headline GDP increased by 0.3% in Q1 2013, unrevised from the second estimate. The increase of 0.3% represents the first quarter-on-quarter growth figure for any quarter not affected by a special event since Q3 2011 when GDP increased by 0.6%. When comparing Q1 2013 with the corresponding quarter of 2012, GDP increased by 0.3%, compared with no growth between Q4 2011 and Q4 2012.
Figure 1 shows the annual level of GDP over the past 15 years and shows how GDP in the UK grew steadily from 2000 until early-2008 when a financial market shock affected UK and global economic growth. Up until that point, services in the UK had continued to grow steadily, while production output had been broadly flat across the same period. UK construction activity grew strongly at the start of the period before a slight fall in 2005 and 2006. Construction activity then recovered so that it was around 20% higher at the end of 2007 compared with the start of 2001. The deterioration in economic conditions during 2008 had a large effect on the construction and production sectors, but the effect on the service sector was less pronounced.
Coming out of the economic downturn in 2008-09, the rate of GDP growth has been slower compared with the early 2000s, owing to weaknesses in the domestic and global markets. Services have continued to grow steadily from mid 2009. Production began to decrease from the start of 2011 following a mild recovery in early 2010, as increased inflation and slower wage growth began to reduce households’ real income. Compounding this subdued demand was the development of the euro area sovereign debt crisis, which affected business sentiment in the EU, a key export market for the UK. Construction activity saw a more marked increase than that of production in 2010. Despite the positive signs during 2010, construction has trended downwards from mid 2011.
Figure 2 shows growths for the chained volume measure of GDP between 1998 and 2012.
Revisions resulting from the incorporation of new data, new methodology, replacement of forecasts, improvements to seasonal adjustment and rebalancing of annual supply and use tables have been taken back to the first quarter of 1997. Methodological revisions have been modelled back to 1991 in such a way as to avoid any discontinuities. Data has also been rebased back to the beginning of the time series.
More detail on these earlier revisions is described in articles published simultaneously with this release and summarised in Hardie and Lee (2013) ‘ Impact of changes in the national accounts and economic commentary for Q1 2013 (193.4 Kb Pdf) ’.
A complete picture of the annual revisions to GDP growth back to 1998 is shown in tables 2 to 5.
Annex A (40.5 Kb Excel sheet) contains growth rates back to Q1 2011.
Output of the agriculture, forestry & fishing industries fell by 6.3% in Q1 2013 following an increase of 0.3% in Q4 2012.
In Q1 2013, production output increased by 0.3% compared with a decrease of 2.2% in Q4 2012. Quarterly growth in mining & quarrying (3.2%) and electricity, gas, steam & air production (1.4%) were largely offset by quarterly falls in manufacturing (-0.2%) (see Figure 4) and water supply & sewerage output (-0.4%).
In Q4 2012, it was noted that an extended and later than usual period of maintenance on North Sea oil rigs had led to a negative impact on production, which fell by 2.2%. This contraction is seen within the ‘mining and quarrying including oil and gas extraction’ industry, which fell by 10.3% in the quarter, resulting in a Gross Value Added figure 0.2 percentage points lower (-0.2%) than if oil and gas were excluded.
The bounce back in Q1 2013 is evident. Increasing by 3.2%, the mining and quarrying industry made a positive quarter-on-quarter contribution to growth. The downward trend in oil and gas extraction however remains, with Q1 2013 now 9.3% lower than Q1 2012.
Construction output fell by 1.8% in Q1 2013, revised up from a 2.4% fall following an increase of 1.7% in the previous quarter. When compared with Q1 2012, construction output decreased by 6.3%.
Growth in the service industries resumed in Q1 2013, increasing by 0.5%, following no growth in Q4 2012 (See Figure 5). The majority of the service industries experienced positive growth in the first quarter, although with five industries increasing and four decreasing this was a narrow majority. When looking at growths quarter on same quarter a year ago the overall services sector has been positive in every quarter since Q2 2010, whereas production output has been contracting each quarter since Q2 2011.
Output of the distribution, hotels & restaurants industries increased by 1.2% in Q1 2013 following a decrease of 0.5% in Q4 2012. The increase in Q1 2013 was due to increases in wholesale activities.
Output of the transport, storage & communication industries rose by 1.4% in Q1 2013 due to increases in computer programming, consultancy & related activities, land transport and telecommunications. In Q4 2012 output of the transport, storage & communication industries rose by 0.6%.
Business services & finance industries output fell by 0.1% in Q1 2013. In Q4 2012 output rose by 0.4%. The decrease in Q1 2013 was mainly due to financial services.
Output of government & other services increased by 0.4% in Q1 2013 following a decrease of 0.6% in Q4 2012. The decrease in quarter four was mainly due to sports activities, amusement & recreation activities which fell following the inclusion of Olympic and Paralympic Games ticket sales in Q3 2012.
Gross value added excluding oil and gas extraction rose by 0.2% in Q1 2013 following no change in Q4 2012.
Annex B (34 Kb Excel sheet) contains growth rates back to Q1 2011.
Gross domestic expenditure (the sum of all expenditure by UK residents on goods and services which are not used up or transformed in a productive process) fell by 0.3% in Q1 2013 following no change in Q4 2012.
Household final consumption expenditure grew by 0.3% in Q1 2013 and has now increased for six successive quarters (see Figure 6). The level of household expenditure is now 1.5% higher than in Q1 2012. The largest increases in household spending in the latest quarter were in housing and miscellaneous goods & services.
General government and non-profit institutions serving households increased by 0.1% and 6.0% respectively in Q1 2013, resulting in a 0.4% increase in final consumption expenditure in Q1 2013.
Gross fixed capital formation (the purchase and disposal of fixed assets used in the production process for more than a year) increased by 0.2% in Q1 2013, a return to positive growth following three quarters of negative growth (see Figure 7).
Including the alignment adjustment, the level of inventories decreased by £0.1 billion in Q1 2013. Excluding the alignment adjustment, the level of inventories fell by £1.9 billion.
The deficit in net trade was £4.3 billion in Q1 2013, compared with a deficit in net trade of £6.6 billion in Q4 2012 (see Figure 8).
Exports of goods fell by 0.6% in Q1 2013, due to a decrease in manufactured goods; specifically material manufactures and chemicals. Exports of services rose by 0.6% in Q1 2013 due to an increase in financial services exports, offset by other business, sea transportation and royalties. In Q1 2013 imports of goods fell by 2.7% due to a decrease in imports of fuel; specifically trade in oil. Imports of services rose 0.4%.
Annex D (42 Kb Excel sheet) contains growth rates back to Q1 2011.
The gross domestic product implied deflator at market prices for Q1 2013 is 2.0% above the same quarter of 2012 (see Figure 9). The stronger growth in the implied deflator in Q1 2013 is due to increases in the household final consumption expenditure and gross fixed capital formation implied deflators. The GDP implied deflator is calculated by dividing current price (nominal) GDP by chained volume (real) GDP and multiplying by one hundred to convert to an index. It is not used in the calculation of GDP; rather it is generated after the calculation of GDP.
Annex C (30.5 Kb Excel sheet) contains growth rates back to Q1 2011.
GDP at current market prices rose by 0.9% in Q1 2013. In Q4 2012, GDP at current market prices rose by 0.8%.
Compensation of employees – which includes both wages & salaries and pension contributions – fell by 0.1% in Q1 2013, revised down from the previously estimated 1.2% increase. Compensation of employees has now been negative in three of the last four quarters (see Figure 10).
The gross operating surplus of corporations, including the alignment adjustment, increased by 4.9% in Q1 2013, the highest quarter on quarter growth since Q3 2010, following an increase of 1.7% in Q4 2012 (see Figure 11). Private non-financial corporations’ operating surplus on an aligned basis rose by 2.7% in Q1 2013 following an increase of 2.0% in Q4 2012. On an unaligned basis private non-financial corporations rose by 2.3% in Q1 2013 following an increase of 1.4% in Q4 2012.
Taxes on products and production less subsidies decreased by 1.8% in Q1 2013 following an increase of 3.8% in Q4 2012.
For the year 2012, the saving ratio was 6.7% unchanged from 6.7% in 2011. The household saving ratio was 4.2% in Q1 2013 compared with 5.9% in the previous quarter.
The Saving Ratio estimates the amount of money households have available to save (known as gross saving), as a percentage of their total disposable income (known as total available households’ resources) both of which can be found on table J3 of the Quarterly National Accounts (QNA) release.
Gross saving estimates the difference between households’ total available resources (mainly wages received, revenue of the self-employed, social benefits and net income such as interest on savings and dividends from shares but excluding taxes on income and wealth) and their current consumption (expenditure on goods and services).
All of the components that make up gross saving and total available resources, and in fact all sector accounts data apart from real household disposable income (RHDI), are estimated in current prices (CP), sometimes known as nominal prices, meaning that they include the effects of price changes.
The saving ratio is published in both non-seasonally (NSA) and seasonally adjusted (SA) formats with the latter removing seasonal effects to allow comparisons over time. However, the saving ratio can be volatile and is sensitive to even relatively small movements to its components, particularly on a quarterly basis, as saving is a small difference between two numbers. It is therefore often revised at successive publications when new or updated data is included.
In Q1 2013, the central government, local government, financial corporations and households sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders (see Figure 12).
Annually for 2012, the central government, local government and financial corporations sectors were net borrowers. Public corporations, private non-financial corporations, households and the rest of the world sectors were net lenders.
Net borrowing was £21.2 billion in Q1 2013 following net borrowing of £32.6 billion in the previous quarter. For the year 2012, central government net borrowing was £94.1 billion following net borrowing of £120.4 billion in 2011.
Net borrowing was £2.5 billion in Q1 2013 following a balanced position in the previous quarter. For the year 2012, local government net borrowing was £4.7 billion following net borrowing of £1.2 billion in 2011.
Net lending was £1.5 billion in Q1 2013 following net lending of £1.2 billion in the previous quarter. For the year 2012, public corporations net lending was £2.9 billion following net lending of £1.3 billion in 2011.
Net borrowing was £2.3 billion in Q1 2013 following net lending of £1.8 billion in the previous quarter. For the year 2012, financial corporations net borrowing was £17.4 billion following net lending of £30.9 billion in 2011.
Net lending was £15.1 billion in Q1 2013, following net lending of £13.6 billion in the previous quarter. For the year 2012, private non-financial corporations net lending was £36.3 billion following net lending of £56.3 billion in 2011.
Net borrowing was £6.5 billion in Q1 2013 following net lending of £1.3 billion in the previous quarter. For the year 2012, households net lending was £14.7 billion, unchanged from net lending of £14.7 billion in 2011.
Net lending was £13.9 billion in Q1 2013 following net lending of £12.7 billion in the previous quarter. For the year 2012, net lending was £55.4 billion following net lending of £18.5 billion in 2011.
Annually for 2012, the saving ratio was 6.7%, unchanged from 6.7% in 2011.
The saving ratio in Q1 2013 was 4.2% following 5.9% in Q4 2012. This decrease was due to a rise in household final consumption expenditure and a fall in compensation of employees in the latest quarter.
For the year 2012, real household disposable income increased by 1.4% following a fall of 1.2% in 2011. This reflects a rise in nominal gross disposable income of 4.0% offset by a rise of 2.6% in the household and NPISH final consumption deflator. This increase in nominal gross disposable income was due to rises in wages and salaries, social benefits other than transfers in kind and gross operating surplus and mixed income.
The level of real household disposable income decreased by 1.7% in the latest quarter following an increase of 0.1% in Q4 2012. This decrease is due to a 1.1% fall in nominal gross disposable income and a rise of 0.6% the household and NPISH final consumption expenditure deflator.
There are two measures of household income, in real terms or in current prices (or nominal as it is often called), and both of these time series can be found in table J2 of this release.
Gross household disposable income (GDI) is the estimate of the total amount of money from income that households have available from wages received, revenue of the self-employed, social benefits and net income (such as interest on savings and dividends from shares) less taxes on income and wealth. All the components that make up GDI are estimated in current prices.
However, by adjusting gross disposable income to remove the effects of inflation, we are able to estimate another useful measure of disposable income called real. This is a measure of real purchasing power of household incomes in terms of the physical quantity of goods and services they would be able to purchase. We use the household expenditure deflator (which can be found in table J2 of this release) to remove the effects of price inflation.
Net lending of private non-financial corporations was £15.1 billion in the latest quarter following net lending of £13.6 billion in the previous quarter. This increase in net lending in the latest quarter was due to a fall in gross capital formation of £5.7 billion partially offset by a rise in net property income of £3.8 billion.
For the year 2012, net lending was £36.3 billion following net lending of £56.3 billion in 2011. This decrease was due to a fall in net property income.
In Q1 2013, GDP fell by 0.2% in the euro area and by 0.1% in the European Union as a whole (EU 27) (see Figure 15). These are based upon second estimates of GDP for Q1 2013 published by Eurostat the statistical office of the European Union. In Q4 2012, GDP decreased by 0.6% in the euro area and by 0.5% in the EU 27.
Compared with Q1 2012, seasonally adjusted GDP in the euro area fell by 1.1%. In the EU 27, GDP was 0.7% lower than in Q1 2012.
GDP for the United States of America increased by 0.6% in Q1 2013, following an increase of 0.1% in Q4 2012. GDP for Japan increased by 1.0% in Q1 2013, following a 0.3% rise in Q4 2012. When compared with the same quarter a year ago, GDP for the United States of America rose by 1.8% and GDP for Japan rose by 0.2%.
More detailed information on estimates for the EU can be found on the Eurostat website. Information on the estimates for the United States of America can be found on the Bureau of Economic Analysis website while information on the estimates for Japan can be found on the Japanese Cabinet Office website. Estimates for the United States of America are consistent with those available at the time of preparation of this publication.
The earliest period open for revision in this release is Q1 1997 (see Figure 16).
Output revisions are shown in Annex E (45.5 Kb Excel sheet) of this release.
Expenditure revisions are shown in Annex F (39.5 Kb Excel sheet) of this release.
Income revisions are shown in Annex G (37 Kb Excel sheet) of this release.
Sector accounts revisions are shown in Annex H (37.5 Kb Excel sheet) of this release.
This release includes data available up to 14 June 2013. Data are consistent with the Index of Production statistical bulletin published on 11 June 2013 and the current price trade in goods data within the UK Trade statistical bulletin published on 7 June 2013.
Blue Book 2013 will be published on 31 July 2013. A preliminary estimate of GDP for Q2 2013 will be published on 25 July 2013. The second estimate of GDP for Q2 2013 will be published on 23 August 2013. A full set of quarterly national accounts for Q2 2013 will be published on 26 September 2013.
Release content and context
This release is the third estimate of GDP. Data content for each successive release of GDP varies according to availability.
The preliminary estimate of GDP is based on output data alone. These are based on survey estimates for the first two months of the quarter with estimates for the third month of the quarter based on forecasts using early returns from businesses. Other (non-survey based) data used in the compilation of the output approach are also based on forecasts.
For the second estimate of GDP output estimates based on survey data are available for all three months of the quarter, in addition to other significant data sources. Estimates of the expenditure and income approaches to measuring GDP are also available in this release based on a combination of limited survey data, other data sources and forecasts.
For the quarterly national accounts release, output survey data are available for all three months of the quarter, along with most other data sources. For the expenditure and income approaches to measuring GDP, more extensive survey data are available, in addition to other data sources and a more limited use of forecasts.
After this release, the current quarter will be subject to revision in accordance with National Accounts revisions policy as further data, annual benchmarks and methodological improvements are implemented.
For more information on the different estimates of GDP, ONS has released a video explaining these differences.
Special Events in 2012
The Diamond Jubilee and the London 2012 Olympic and Paralympic Games made 2012 an unusual and difficult year for policymakers and anybody interested in understanding the behaviour of the UK economy. ONS designated both events as ‘special events’ under the ONS Special Events policy as they had a potentially significant effect on many key economic statistics. An article published by ONS on 17 May 2013 took a retrospective look at each event and considered the impact on a range of published economic indicators, including GDP.
National accounts methodology and articles
ONS regularly publishes methodological information and articles to give users more detailed information on developments within the National Accounts; supplementary analyses of data to help users with the interpretation of statistics and guidance on the methodology used to produce the National Accounts.
Experience shows that the output approach provides the best short term estimate of GDP growth given the availability of data in the UK. GDP growth according to the expenditure and income approaches is therefore brought into line with that recorded by output.
ONS has produced an article 'Interpreting the Recent Behaviour of the Economy' available on the ONS website to aid interpretation of the recent movements in the economy.
An article describing the 'Content of Blue Book 2013' (62.7 Kb Pdf) was published by ONS on 30 November 2012. It includes changes introduced in this publication and outlines future plans for subsequent Blue and Pink Books.
An article summarising the upcoming improvements to the estimation of gross fixed capital formation and changes in inventories is now available on the ONS National Accounts methodology and articles web pages. These developments are part of the programme of continuous improvement to the UK National Accounts.
National accounts classifications decisions
The UK National Accounts are produced under internationally agreed guidance and rules set out principally in the European System of Accounts 1995 (ESA 95) and the accompanying Manual on Government Deficit and Debt (MGDD).
In the UK the Office for National Statistics (ONS) is responsible for the application and interpretation of these rules. ONS therefore makes classification decisions based upon the agreed guidance and rules and these are published on the ONS website.
ONS publishes a monthly Economic Review discussing the economic background giving economic commentary on the latest GDP estimate and other ONS economic releases. The next article will be published on 3 July 2013.
Basic Quality Information for GDP Statistical Bulletin
A Quality and Methodology Information report (197.4 Kb Pdf) for this Statistical Bulletin can be found on the ONS website.
Key quality issues
Common pitfalls in interpreting series: 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’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures and such mistakes are made quite clear when they do occur.
Estimates for the most recent quarters are provisional and are subject to revision in the light of updated source information. ONS currently provides an analysis of past revisions (244.6 Kb Pdf) in the GDP and other Statistical Bulletins which present time series.
ONS has a webpage dedicated to revisions to economic statistics which brings together ONS work on revisions analysis, linking to articles, revisions policies and key documentation from the Statistics Commission's report on revisions.
Revisions to data provide one indication of the reliability of key indicators. The tables below show summary information on the size and direction of the revisions which have been made to data covering a five-year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows if the result of the test is significant.
Revisions to GDP estimates
Table 6 shows the revisions to month 1 and month 2 estimates of GDP. The analysis of revisions between month 1 and month 2 uses month 2 estimates published from August 2008 (Q2 2008) to May 2013 (Q1 2013). The analysis of revisions between month 2 and month 3 uses month 3 estimates published from June 2008 (Q1 2008) to March 2013 (Q4 2012).
|GDP Growth in the latest period||Revisions between early estimates of GDP growth (quarterly, CVM)|
|Revisions to GDP growth||%||Average over the last five years||Average over the last five years without regard to sign (average absolute revision)|
|Between M1 and M2||0.3||-0.02||0.06|
|Between M2 and M3||0.3||-0.06||0.11|
Table 7 shows the revisions to GDP growth between the estimate published three months after the end of the quarter and the equivalent estimate three years later. The analysis uses month 3 estimates first published from June 2005 (Q1 2005) to March 2010 (Q4 2009) for GDP.
|GDP Growth in the latest period||Revisions between first publication and estimates three years later|
|(%)||Average over the last five years||Average over the last five years without regard to sign (average absolute revision)|
|GDP growth (quarterly, CVM)||0.3||0.24||0.50|
|Household saving ratio||4.2||-0.95||1.21|
Revisions triangles for the main components of GDP from expenditure, output and income approaches and spreadsheets containing revisions triangles (real-time databases) of estimates from 1992 to date and the calculations behind the averages in both tables are available on the ONS website.
An article titled 'Updated analysis: Why is GDP revised?' (300.9 Kb Pdf) , published on 13 June 2013, is available on the ONS' website.
ONS has also recently published revisions triangles for current price GDP at market prices and for the GDP implied deflator which will be updated on an ongoing basis. Both are available on the ONS website and are the first to be released in an ongoing development programme to improve the coverage of the revisions triangles.
Information on the methods ONS uses for balancing the output, income and expenditure approaches to measuring GDP can be found on the ONS website.
The size and direction of the quarterly alignment adjustments in Q1 2013 indicate that, for Q1 2013, the levels of both expenditure and income were lower than that of output during this quarter.
Alignment adjustments typically have a tolerance of +/-£1,500 million on any quarter. However, in periods where the data sources are particularly difficult to balance, like Q1 2013 for instance, a slightly larger alignment adjustment is sometimes needed.
Latest copies of this and other ONS' releases are available under Publications on the ONS' website. ONS has also produced a short guide to the UK National Accounts (93.6 Kb Pdf) .
Details of the policy governing the release of new data are available from the media relations office. Also available is a list of the names of those given pre-publication access to the contents of this bulletin.
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