Statistical bulletin: Quarterly National Accounts, Q3 2011

The headline figures are:

• UK gross domestic product (GDP) in volume terms increased by 0.6 per cent in the third quarter of 2011.
• Output of the production industries rose by 0.2 per cent, within which manufacturing rose by 0.1 per cent.
• Output of the service industries increased by 0.7 per cent, while output of the construction industries increased by 0.3 per cent.
• Household final consumption expenditure was unchanged in volume terms in the latest quarter.
• Real household disposable income rose by 0.3 per cent in 2011 quarter three.

Summary

This bulletin contains information on the third estimate of GDP for 2011 quarter three. It includes information along with revisions to and more detail on the output, expenditure and income approach to GDP. Also included are data on the institutional sector accounts including the household saving ratio and disposable income.

Key Data Q3 2011

 

Key data 2011 Q3

			Gross Domestic Product
	Household sa ving ratio	Real household disposable income	Current market  prices	Chained volume measure	Chained volume measure
seasonally adjusted	per cent	per cent	2008=100	2008=100	per cent
2010 Q1	8.5	0.5	100.4	96.6	0.4
2010 Q2	6.3	-1.7	101.7	97.7	1.1
2010 Q3	7.0	0.5	102.9	98.3	0.7
2010 Q4	6.8	-0.7	103.2	97.9	-0.5
2011 Q1	5.2	-1.9	104.5	98.3	0.4
2011 Q2	6.4	1.3	104.9	98.3	0.0
2011 Q3	6.6	0.3	106.0	98.8	0.6

Table source: Office for National Statistics

Table notes:

1. Percentage change on previous quarter: seasonally adjusted

GDP analysed by output categories, chained volume measures - Tables B1 and B2

See Annex A (3.04 Mb Excel sheet) for growth rates back to 2010 Q1.

The output of the agriculture, forestry & fishing sector increased by 0.5 per cent in the third quarter of 2011 compared with a decrease of 1.1 per cent in the second quarter of 2011.

The output of the production industries rose by 0.2 per cent in the third quarter of 2011. This compares with a fall of 1.4 per cent in the second quarter of 2011. In the year 2010, output of the production industries increased by 1.9 per cent.

Mining & quarrying output increased by 0.2 per cent in the latest quarter. This compares with a decrease of 7.7 per cent in the previous quarter.

Manufacturing output rose by 0.1 per cent in the latest quarter.

Electricity, gas, steam & air conditioning supply increased by 2.2 per cent in 2011 quarter three compared with a decrease of 1.4 per cent in 2011 quarter two.

Sewerage & waste management decreased by 0.5 per cent in the third quarter of 2011 compared with a decrease of 2.8 per cent in the second quarter of 2011.

Construction output is estimated to have increased by 0.3 per cent in 2011 quarter three. This compares with an increase of 3.1 per cent in 2011 quarter two. In the year 2010, construction output increased by 8.2 per cent.

Services output increased by 0.7 per cent in the third quarter of 2011 compared with an increase of 0.1 per cent in the second quarter of 2011. For the year 2010, services output increased by 1.4 per cent.

Output of the distribution, hotels & restaurants sector increased by 0.2 per cent in 2011 quarter three. Strength in hotels and restaurants was offset by a decline in distribution.

Output of the transport, storage & communication sector rose 0.3 per cent in 2011 quarter three, compared with a fall of 0.2 per cent in 2011 quarter two. The increase was driven by growth in information and communication.

The business services & finance sector rose by 1.2 per cent in 2011 quarter three, compared with an increase of 0.2 per cent in 2011 quarter two. The main drivers behind growth in 2011 quarter three were professional, scientific & technical activites and finance & insurance.

Government & other services output increased 0.6 per cent in 2011 quarter three, compared with an increase of 0.2 per cent in 2011 quarter two. The main drivers behind the growth in 2011 quarter three were human health & social work activities and education.

GDP analysed by expenditure categories, chained volume measures - Table C2

See Annex B (3.04 Mb Excel sheet) for growth rates back to 2010 Q1.

Gross domestic expenditure increased by 0.8 per cent in the third quarter of 2011.

Household final consumption expenditure was unchanged in 2011 quarter three, compared with a decrease of 0.4 per cent in 2011 quarter two. The level of household expenditure is now 1.0 per cent lower than in 2010 quarter three. The largest increase in spending in the latest quarter was on housing. This was offset by a decrease in spending on miscellaneous goods and services. For the year 2010, household final consumption expenditure rose by 1.2 per cent.
 

Government final consumption expenditure increased by 0.2 per cent in 2011 quarter three, compared with an increase of 0.4 per cent in 2011 quarter two. In 2010, government final consumption expenditure increased by 1.5 per cent.

Gross fixed capital formation rose by 1.3 per cent in the latest quarter, compared with a fall of 0.6 per cent in the previous quarter. In the year 2010, gross fixed capital formation rose by 3.1 per cent.
 
Including the alignment adjustment, the level of inventories increased by £2.9 billion in the latest quarter. In the year 2010, the level of inventories increased by £4.9 billion.

The deficit in net trade was £5.4 billion in 2011 quarter three, compared with a deficit in net trade of £4.0 billion in 2011 quarter two.

Exports of goods fell by 0.2 per cent in 2011 quarter three, driven by a fall in exports of fuels. This was partially offset by increases in exports of capital goods and chemicals. Imports of goods rose by 1.0 per cent in 2011 quarter three, driven by an increase in imports of capital goods and fuels. This was partly offset by a fall in imports of consumer goods.

Export of services fell by 1.6 per cent in the latest quarter, driven by exports of travel and other business. Imports of services fell by 1.3 per cent in 2011 quarter three, driven by imports of travel.
    

 

GDP implied deflator

See Annex D (3.04 Mb Excel sheet) for growth rates back to 2010 Q1.

The gross domestic product implied deflator at market prices for 2011 quarter three is 2.5 per cent above the same quarter of 2010.
  

GDP analysed by income categories at current prices - Table D

See Annex C (3.03 Mb Excel sheet) for growth rates back to 2010 Q1.

GDP at current market prices rose by 1.0 per cent in 2011 quarter three, compared with an increase of 0.3 per cent in 2011 quarter two.

Compensation of employees increased by 1.0 per cent in 2011 quarter three, compared with an increase of 0.7 per cent in 2011 quarter two. In the year 2010, compensation of employees increased by 3.2 per cent.
 

The gross operating surplus of corporations rose by 0.1 per cent in 2011 quarter three, compared with a fall of 0.6 per cent in 2011 quarter two. Private non-financial corporations' operating surplus rose by 1.3 per cent in the latest quarter. Financial corporations' operating surplus fell by 4.2 per cent in 2011 quarter three. In the year 2010, gross operating surplus of corporations rose by 0.8 per cent.

 

Taxes on production less subsidies increased by 3.6 per cent in 2011 quarter three. In 2010 as a whole, taxes on production less subsidies increased by 16.3 per cent.

Economic background

The latest GDP data for the third quarter continue to indicate that growth in all three approaches is quite concentrated in a small proportion of components and is not broadly based. The additional data that have been taken on since the second estimate of third quarter GDP has however resulted in those key sources of growth changing slightly.

Growth in the output approach is very much concentrated in the service industries, within which it is primarily driven by the scientific administration & support and financial & insurance service industries. Together these two service components contributed 0.3 percentage points to GDP growth. Education and health services contributed a further 0.1 percentage point.

Growth in the expenditure approach stems largely from increases in inventories, supported by gross fixed capital formation. Together, these two components account for 0.8 percentage points. However, net trade reduced this growth by 0.4 percentage points. Household spending and government consumption both made negligible contributions. For household spending, this reflects the weak position of household finances and consumer confidence. For government consumption, this reflects the continued squeeze on expenditure.

Under the income approach, growth in current prices was largely concentrated in compensation of employees (CoE) and taxes less subsidies, with some additional support from the gross operating surplus of private non-financial corporations. CoE in nominal terms has grown at a stronger rate than household consumption in the second and third quarters. This is a turnaround compared with much of 2009, 2010 and the early part of 2011, though this was partly due to household consumption in nominal terms being raised by a period of relatively strong inflation. Although private non-financial corporations made a positive contribution to growth, this contribution was relatively modest compared with most of 2010 and the first quarter of 2011. Taxes less subsidies have made a positive contribution to GDP growth in current prices for most of the last four years.

The profile of GDP growth in recent quarters continues to point towards a rather fragile economic picture. During the nine quarters of the recovery, the economy has gained just over half of the output lost during the five quarters of contraction.

Sector Accounts - Tables I, J1, J2, J3, K1 and K2

Summary

The household saving ratio was 6.6 per cent on 2011 quarter three compared with 6.4 per cent in the previous quarter. For the year 2010 the saving ratio was 7.2 per cent.

Net lending by sector

In 2011 quarter three, the central government and local government sectors were net borrowers. Public corporations, financial corporations, private non-financial corporations, households and the rest of the world sectors were net lenders.

Annually for 2010, the central government and local government sectors were net borrowers. Public corporations, financial corporations, private non-financial corporations, households and the rest of the world sectors were net lenders.

Central government

Net borrowing was £30.3 billion in 2011 quarter three following net borrowing of £32.0 billion in the previous quarter. For the year 2010, central government net borrowing was £147.7 billion compared with £147.9 billion in 2009.

Local government

Net borrowing was £1.6 billion in 2011 quarter three following net lending of £0.1 billion in the previous quarter. For the year 2010, local government net borrowing was £1.4 billion compared with £4.1 billion in 2009.

Public corporations

Net lending was £0.2 billion in 2011 quarter three, following net lending of £0.3 billion in the previous quarter. For the year 2010, public corporations net lending was £1.7 billion compared with net lending of £0.5 billion in 2009.

Financial corporations

Net lending was £5.2 billion in 2011 quarter three following net lending of £6.7 billion in the previous quarter. For the year 2010, financial corporations net lending was £17.6 billion compared with £46.3 billion in 2009.

Private non-financial corporations

Net lending was £12.0 billion in 2011 quarter three, following net lending of £17.2 billion in the previous quarter. For the year 2010, private non-financial corporations net lending was £53.1 billion compared with £50.4 billion in 2009.

Household and non-profit institutions serving households

Net lending was £2.9 billion in 2011 quarter three following net lending of £2.8 billion in the previous quarter. For the year 2010, household and non-profit institutions serving households net lending was £24.9 billion compared with net lending of £38.1 billion in 2009.

Rest of the world

Household and non-profit institutions serving households (NPISH) sector

The saving ratio in 2011 quarter three was 6.6 per cent compared with 6.4 per cent in 2011 quarter two. This rise was driven by higher wages and salaries and increased net social benefits, patially offset by increased household expenditure.

The level of real household disposable income rose by 0.3 per cent in the latest quarter following a rise of 1.3 per cent in 2011 quarter two. The rise in the latest quarter is due to an increase of 1.2 per cent in nominal gross disposable income offset by a rise of 0.9 per cent in the household and NPISH final consumption expenditure deflator. Real household disposable income is now 1.0 per cent below the level seen in 2010 quarter three.

For the year 2010, real household disposable income decreased by 0.2 per cent following on from 1.6 per cent growth in 2009. This reflects a rise of 3.9 per cent in the nominal gross disposable income, which was driven by increased gross operating surplus and compensation of employees, offset by an increase of 4.1 per cent in the household and NPISH final consumption deflator.

P rivate non-financial corporations sector

Net lending of private non-financial corporations was £12.0 billion in the latest quarter, compared with net lending of £17.2 billion in the previous quarter. This decrease in net lending in the latest quarter was driven by decreased property income and increased gross capital formation.

For the year 2010, net lending was £53.1 billion compared with £50.4 billion in 2009. This rise in net lending was driven by increased net property income and gross operating surplus offset by a rise in gross capital formation.

Revisions

GDP and components (previously published on 24 November 2011)

Revisions resulting from the incorporation of new data and replacement of forecasts and estimates based on earlier data have been taken back to the first quarter of 2010.

GDP growth for 2011 quarter three has been revised up by 0.1 percentage points from the estimate published last month. There has been a downward revision of 0.1 percentage points to 2011 quarter two; an upward revision of 0.1 percentage points to 2010 quarter three and an upward revision of 0.2 percentage points to 2010 quarter one.

Output components

Growth in the volume of production output in 2011 quarter three has been revised down by 0.2 percentage points from the estimate published last month. The 2010 quarter three, 2011 quarter one and 2011 quarter two estimates for production output have been revised down 0.1, 0.2 and 0.2 percentage points respectively. The 2010 quarter four estimate for production output has been revised up by 0.1 percentage points.

Growth in the volume of services output in 2010 quarter one, 2010 quarter two, 2010 quarter four, 2011 quarter one and 2011 quarter three have all been revised up by 0.1 percentage points. The 2010 quarter three estimate of services output has been revised up by 0.2 percentage points, while the 2011 quarter two estimate of services output has been revised down by 0.1 percentage points.

Growth in construction output in 2011 quarter three has been revised up by 0.5 percentage points from the previous estimate.

Expenditure components (chained volume measure)

Household final consumption expenditure has remained unrevised for 2011 quarter three.

General government final consumption expenditure has been reivsed down by 0.7 percentage points in 2011 qurter three.

Gross fixed capital formation has been revised up 1.5 percentage points in 2011 quarter three.

Exports and imports of goods and services growth have both been revised up by 0.2 percentage points in 2011 quarter three.

Income components

In the latest quarter, compensation of employees has been revised down by 0.2 percentage points from the previous published estimate.

The gross operating surplus of corporations in 2011 quarter three has been revised down by 0.3 percentage points.

Sector accounts (previously published on 25 October 2011)

Revisions have been taken back to 2010 quarter one in this release.

Net lending by sector

Central government

Net borrowing in 2011 quarter two was revised from £39.9 billion to £32.0 billion.

Local government

Net lending in 2011 quarter two was revised from £0.4 billion to £0.1 billion.

Public corporations

Net borrowing in 2011 quarter two was revised from £5.0 million to net lending of £0.3 billion.

Financial corporations

Net lending in 2011 quarter two was revised from £8.9 billion to £6.7 billion.

Private non-financial corporations

Net lending in 2011 quarter two was revised from £18.1 billion to £17.2 billion.

Household and NPISH

Net lending in 2011 quarter two was revised from £5.6 billion to £2.8 billion.

Rest of world

Net lending in 2011 quarter two was revised from £1.1 billion to £6.4 billion.

Household and non profit institutions serving households (NPISH) sector

The household saving ratio was revised down in 2011 quarter two from 7.4 per cent to 6.4 per cent.

Real household disposable income growth has been revised up from a rise of 1.2 per cent to a rise of 1.3 per cent in 2011 quarter two.

Background notes

1. Release policy

   This release includes data available up to 12 December 2011. Data are consistent with the Index of Production statistical bulletin published 7 December 2011 and the Trade in Goods data within the UK Trade Statistical Bulletin published 9 December 2011.

2. A preliminary estimate for the fourth quarter of 2011 will be published 25 January 2012. The second estimate of GDP for the fourth quarter of 2011 will be published 24 February 2012.

3. Forthcoming changes

   As a result of a review of the content and presentation of GDP statistical bulletins and followng consultation with key users, ONS will be making some presentational changes to future releases. From the second estimate of GDP for 2011 quarter 4 published 24 February, table E ( the detailed breakdown of changes to inventories) will no longer be included, but an additional table, equivalent to table M in the quarterly national accounts bulletin (quarterly alignment adjustments), will be included. Additionally, in all subsequent second estimate and quarterly national accounts bulletins, the aggregate income and expenditure tables will include the alignment adjustments as "of which" items within the revelant components - changes in inventories and gross operating surplus.

4. Treatment of Olympic ticket sales

   An article titled Treatment of the sale of Olympic tickets in the National Accounts (19.1 Kb Pdf)  is available on the ONS website.

5. Basic Quality Information for GDP Statistical Bulletin
   
   A  Quality and Methodology Information (195.1 Kb Pdf) Report for this Statistical Bulletin can be found on the ONS website.

6. 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.

7. Reliability
   
   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 in the GDP and other Statistical Bulletins which present time series (244.6 Kb Pdf) .
   
   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. test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.

8. Table 1 below 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 February 2007 (2006q4) to November 2011 (2011q3). The analysis of revisions between month 2 and month 3 uses month 3 estimates published from December 2006 (2006q3) to September 2011 (2011 q2).
   
   

   Table 1: Revisions to early estimates of GDP growth

   			Revisions between early estimates of GDP growth (quarterly, CVM)
   Revisions to GDP growth	GDP growth in the latest period (per cent)		Average over the last five years		Average over the last five years without regard to sign (average absolute revision)
   Between M1 and M2	0.6		0.01		0.05
   Between M2 and M3	0.6		-0.04		0.08

   Table source: Office for National Statistics

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   Table 2 below 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 December 2003 (2003q3) to September 2008 (2008q2) for GDP.
   
   

   Table 2: Revisions to month 3 estimates of GDP growth and the household saving ratio

   		Revisions between first publication and estimates three years later
   	GDP growth in the latest period (per cent)	Average over the last five years	Average over the last five years without regard to sign (average absolute revision)
   GDP growth (quarterly CVM)	0.6	-0.07	0.23
   Household saving ratio	6.6	-0.95	1.21

   Table source: Office for National Statistics

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   Spreadsheets giving revision 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.
   
   Revisions triangles for the main components of GDP from expenditure, ouput and income approaches are also available.
   
   An article titled Understanding the quality of early estimates of Gross Domestic Product, which was first published in December 2009, is available on the ONS website.

9. Coherence

   Historic experience shows that the output approach provides the best timely approach to measuring GDP growth. GDP growth according to the expenditure and income approaches is therefore brought into line with that recorded by output.

10. Further information

    Latest copies of this and other ONS releases are available on the ONS website.

    More information underlying the National Accounts (124.6 Kb Pdf) can also be found on the website.

11. 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 (123.6 Kb Pdf) to the contents of this bulletin.

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14. Index to tables

    Gross domestic product tables

    National accounts aggregates (index numbers) .............................................. A1

    National accounts aggregates ......................................................................... A2

    Gross value added chained volume measures at basic prices, by category of output ............................................................................................................... B1

    Gross value added chained volume measures at basic prices, by category of output: service industries ................................................................................. B2

    Gross domestic product: expenditure
    Current market prices ...................................................................................... C1

    Gross domestic product: expenditure
    Chained volume measures ............................................................................. C2

    Gross domestic product: by category of income
    Current market prices ....................................................................................... D

    Household final consumption expenditure by purpose
    Current market prices ...................................................................................... E1

    Household final consumption expenditure (goods and services)
    Current market prices ...................................................................................... E2

    Household final consumption expenditure by purpose
    Chained volume measures ............................................................................. E3

    Household final consumption expenditure (goods and services)
    Chained volume measures ............................................................................. E4

    Gross fixed capital formation by sector and type of asset
    Chained volume measures ................................................................................F

    Changes in inventories
    Chained volume measures ............................................................................... G

    Exports and imports of goods and services
    Current market prices ...................................................................................... H1

    Exports and imports of goods and services
    Chained volume measures .............................................................................. H2

    Sector accounts tables
    Net lending/borrowing by sector ......................................................................... I

    Households sector: allocation of primary income account ............................... J1

    Households sector: secondary distribution of income account .........................J2

    Households sector: use of disposable income account .................................. J3

    Private non-financial corporations sector:
    allocation of primary income account .............................................................. K1

    Private non-financial corporations sector:
    secondary distribution of income account and capital account ....................... K2

    Other analysis
    Gross value added at basic prices: individual measures ....................................L

    Alignment adjustments........................................................................................M

    Revisions tables
    Revisions analysis: revisions against previously published estimates ...............R

15. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name	Phone	Department	Email
Pete Lee	+44 (0)1633 456713	Office for National Statistics	gdp@ons.gsi.gov.uk