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 second estimate of GDP for Q2 2013. It includes initial estimates on the expenditure and income approaches to GDP, along with revisions to and more detail on the output approach. In line with national accounts revisions policy, the only period open for revision is Q2 2013.
|Current market prices||Chained volume measures|
|Gross domestic product||Compensation of employees||Gross domestic product||Household expenditure||Gross fixed capital formation|
Headline GDP increased by 0.7% in Q2 2013, revised up from the previously estimated 0.6% increase. When comparing Q2 2013 with the corresponding quarter of 2012, GDP increased by 1.5%, compared with a 0.3% increase between Q1 2012 and Q1 2013.
Figure 1 shows the quarterly 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 2009, and activity in these industries is now approximately at the level previously seen in early 2008. Production began to decrease from the start of 2011 following a mild recovery in 2010, as increased inflation and slower wage growth began to reduce households’ real income. Compounding this subdued domestic 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 late 2011.
Figure 2 shows growths for the chained volume measure of GDP between 1998 and 2012.
Annex A (37.5 Kb Excel sheet) contains growth rates back to Q1 2012.
All four main industrial groupings within output (agriculture, production, construction and services) increased in Q2 2013 compared with Q1 2013; the last time that all four industries experienced quarterly growth was in Q3 2010.
Output of the agriculture, forestry & fishing industries rose by 1.7% in Q2 2013 following a decrease of 6.3% in Q1 2013.
In Q2 2013, production output increased by 0.6% compared with an increase of 0.3% in Q1 2013. Electricity, gas, steam & air conditioning supply was the only production industry to contract falling by 2.4% in Q2 2013 compared with an increase of 1.4% in Q1 2013.
Construction output rose by 1.4% in Q2 2013, revised up from a 0.9% increase following a decrease of 1.8% in the previous quarter. When compared with Q2 2012, construction output decreased by 0.5%.
The service industries grew by 0.6% in Q2 2013 compared with the previous quarter when they increased by 0.5%. Most service industries experienced positive growth in the quarter with the exception of financial & insurance activities which decreased by 0.8%, public administration, defence & social security which decreased by 0.7% and other services which decreased by 0.3%. Service industries output has increased in every quarter compared with the same quarter a year ago since Q2 2010, whereas production output has been contracting on the same basis in each quarter since Q2 2011.
Output of the distribution, hotels & restaurants industries increased by 1.7% in Q2 2013 following an increase of 1.2% in Q1 2013. The increase in Q2 2013 was largely due to increases in wholesale activities.
Output of the transport, storage & communication industries rose by 0.6% in Q2 2013 mainly due to increases in computer programming, consultancy & related activities and telecommunications. In Q1 2013 output of the transport, storage & communication industries rose by 1.4%.
Business services & finance industries output rose by 0.6% in Q2 2013. In Q1 2013 output fell by 0.1%. The increase in Q2 2013 was mainly due to architectural & engineering activities, technical testing and employment activities.
Output of government & other services was unchanged in Q2 2013 following an increase of 0.4% in Q1 2013. Upward growth in Q2 2013 from human health activities was offset by downward growth from public administration & defence & compulsory social security.
Gross value added excluding oil and gas extraction rose by 0.7% in Q2 2013 following an increase of 0.2% in Q1 2013.
Annex B (30.5 Kb Excel sheet) contains growth rates back to Q1 2012.
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) rose by 0.3% in Q2 2013 following a fall of 0.3% in Q1 2013.
Household final consumption expenditure has grown at similar quarterly rates throughout 2012 and so far in to 2013, increasing by 0.4% in Q2 2013 compared with Q1 2013 (see Figure 6). The level of household expenditure is now 1.6% higher than in Q2 2012.
General government final consumption expenditure increased by 0.9% in Q2 2013 while non-profit institutions serving households final consumption expenditure fell by 2.5% in Q2 2013.
Gross fixed capital formation (the purchase and disposal of fixed assets used in the production process for more than a year) increased by 1.7% in Q2 2013 (see Figure 7).
Including the alignment adjustment, the level of inventories decreased by £1.0 billion in Q2 2013. Excluding the alignment adjustment, the level of inventories rose by £0.7 billion.
The deficit in net trade was £3.2 billion in Q2 2013, compared with a deficit in net trade of £4.3 billion in Q1 2013 (see Figure 8).
Annex D (36 Kb Excel sheet) contains growth rates back to Q1 2012.
The gross domestic product implied deflator at market prices for Q2 2013 is 1.8% above the same quarter of 2012 (see Figure 9). The positive growth in the implied deflator in Q2 2013 is due to increases in the household and non-profit institutions serving households final consumption expenditure 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 (29.5 Kb Excel sheet) contains growth rates back to Q1 2012.
GDP at current market prices rose by 0.4% in Q2 2013. In Q1 2013, GDP at current market prices rose by 0.9%.
Compensation of employees – which includes both wages & salaries and pension contributions - increased by 2.4% in Q2 2013 after falling by 0.1% in Q1 2013 (see Figure 10). This is the highest quarterly increase since Q3 2000 (also 2.4%) and partly reflects unusually high bonus payments in April 2013.
In contrast, the gross operating surplus of corporations – effectively the profits of companies operating within the UK – including the alignment adjustment, fell by 4.8% in Q2 2013 compared with the previous quarter, following an increase of 4.9% in Q1 2013. (see Figure 11).
Taxes on products and production less subsidies increased by 1.0% in Q2 2013 following a decrease of 1.8% in Q1 2013.
In Q2 2013, GDP grew by 0.3% quarter on quarter in both the euro area and the European Union (EU 27) (see Figure 12). These are based upon flash estimates of GDP for Q2 2013 published by Eurostat, the statistical office of the European Union. In Q1 2013, GDP decreased by 0.3% in the euro area and by 0.1% in the EU 27. When compared with the second quarter of 2012, there was negative growth for both the euro area and the European union (EU27), decreasing by 0.7% and 0.2% respectively.
With Croatia joining the European Union in July 2013, Eurostat have also produced GDP including the new 28th member for Q2 2013. The addition of Croatia, creating EU 28, had no impact on GDP growth in Q2 2013.
GDP for the United States of America increased by 0.4% in Q2 2013 following an increase of 0.3% in Q1 2013. GDP for Japan grew by 0.6% in Q2 2013, slightly less than the 0.9% rise in the previous quarter. When compared with the same quarter a year ago, GDP for the United States of America rose by 1.4% and GDP for Japan rose by 0.9%.
More detailed information on these estimates 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.
The only period open for revision in this release is Q2 2013 (see Figure 13).
Output revisions are shown in Annex E (37.5 Kb Excel sheet) of this release.
This release includes data available up to 16 August 2013. Data are consistent with the Index of Production statistical bulletin published on 6 August 2013 and the current price trade in goods data within the UK Trade statistical bulletin published on 9 August 2013.
To improve coverage within the GDP dataset ONS is publishing a proposed new table (12.5 Kb Pdf) to accompany the quarterly national accounts on the ONS website, detailing key GDP variables on a financial year basis. The table will be then be incorporated into the reference tables accompanying the quarterly national accounts release on 26 September 2013.
Earlier publication of gross fixed capital formation data
As part of the current review of the release of business investment data, and in response to user feedback, estimates of the sector and asset breakdowns of gross fixed capital formation will now be published a month earlier as part of the Business Investment release. Previously, these estimates were first published in the Quarterly National Accounts and UK Economic Accounts, which are released in the third month of each quarter.
ONS will review this trial publication of preliminary results over the coming year. The review will include an assessment of the scale of revisions to these preliminary estimates when later results are published. ONS would welcome feedback on the earlier publication of the sector and asset breakdowns, which can be provided via email@example.com.
Gross value added industry weights dataset
An update to the annual weights used within the output approach of GDP has been included in the Index of Services dataset. This update revises the weights in line with Blue Book 2013, published on 31 July 2013. All weights are given in parts per thousand and are available back to 1997.
Release content and context
This release includes the second 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 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 classification 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 4 September 2013.
Basic quality information for GDP statistical bulletin
A Quality and Methodology Information report (195.1 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 2 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 September 2008 (Q2 2008) to June 2013 (Q1 2013).
|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||0.7||0.02||0.06|
|Between M2 and M3||0.7||-0.03||0.09|
Table 3 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 September 2005 (Q2 2005) to June 2010 (Q1 2010) 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)||0.7||-0.08||0.40|
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 Q2 2013 indicate that, for Q2 2013, the levels of both expenditure and income were higher 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 Q2 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 (105.5 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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|Matthew Hughes||+44 (0)1633 455827||Office for National Statisticsemail@example.com|