This bulletin contains information on the second estimate of GDP for the fourth quarter of 2012. It includes initial estimates on the expenditure and income approaches to GDP for the first time, along with revisions to and more detail on the output approach. In line with national accounts revisions policy, data back to 2012 quarter one are open for revision in this estimate.
|Current market prices||Chained volume measures|
|Gross domestic product||Compensation of employees||Gross domestic product||Household expenditure||Gross fixed capital formation|
Annex A (29 Kb Excel sheet) contains growth rates back to Q1 2012.
Output of the agriculture, forestry & fishing industries fell by 0.5% in the fourth quarter of 2012 following an increase of 4.9% in the third quarter of 2012.
Output of the production industries fell by 1.9% in the fourth quarter of 2012. In the third quarter of 2012 output of the production industries rose by 0.7%. In the year 2012, production industries output fell by 2.4%.
Mining & quarrying output decreased by 11.0% in the fourth quarter of 2012 following an increase of 2.0% in the previous quarter.
Manufacturing output fell by 1.3% in the fourth quarter of 2012. In 2012 quarter three manufacturing output rose by 0.7% (see Figure 2).
Electricity, gas, steam & air conditioning supply increased by 2.3% in the fourth quarter of 2012 following a decrease of 2.5% in the third quarter of 2012.
Water supply, sewerage & waste management increased by 1.3% in the fourth quarter of 2012 following an increase of 2.1% in the third quarter of 2012.
Construction output increased by 0.9% in the fourth quarter of 2012 following a decrease of 2.2% in the third quarter of 2012. For the year 2012 construction output fell by 8.2%.
Services output decreased by 0.1% in the fourth quarter of 2012 following an increase of 1.2% in the third quarter of 2012 (see Figure 3). For the year 2012, services output increased by 1.0%.
Output of the distribution, hotels & restaurants industries decreased by 0.5% in the fourth quarter of 2012 following an increase of 1.9% in the third quarter. The decrease in 2012 quarter four was mainly due to retail trade, accommodation and food service activities.
Output of the transport, storage & communication industries rose by 1.2% in 2012 quarter four following an increase of 0.2% in the third quarter of 2012. The increase was mainly due to motion picture, video & TV programming production, sound recording & music publishing activities and programming & broadcasting activities.
Output of the business services & finance industries rose by 0.2% in the fourth quarter of 2012. In the third quarter of 2012 output of the business services & finance industries rose by 0.9%. The increase was mainly due to employment activities and legal & accounting activities.
Output of government & other services decreased by 0.8% in the fourth quarter of 2012 following an increase of 1.7% in the third quarter of 2012. The decrease in the fourth quarter was mainly due to sports activities, amusement & recreation activities which fell following the inclusion of Olympic games ticket sales in quarter three.
Gross value added excluding oil and gas extraction fell by 0.1% in the fourth quarter of 2012 following an increase of 1.0% in the third quarter of 2012.
Annex B (30 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) fell by 0.2% in the fourth quarter of 2012 following an increase of 0.6% in 2012 quarter three.
Household final consumption expenditure increased by 0.2% in the fourth quarter of 2012, following an increase of 0.3% in 2012 quarter three (see Figure 4). The level of household expenditure is now 1.5% higher than in 2011 quarter four. For the year 2012 household final consumption expenditure increased by 1.0%.
Government final consumption expenditure increased by 0.6% in the fourth quarter of 2012, following an increase of 0.5% in the third quarter. In 2012 government final consumption expenditure rose by 2.6%.
Gross fixed capital formation decreased by 0.4% in the fourth quarter of 2012, following a decrease of 0.6% in the previous quarter (see Figure 5). In 2012 gross fixed capital formation increased by 1.4%.
Including the alignment adjustment, the level of inventories increased by £0.8 billion in the fourth quarter of 2012. Excluding the alignment adjustment, the level of inventories increased by £1.1 billion.
The deficit in net trade was £5.7 billion in the fourth quarter of 2012, compared with a deficit in net trade of £5.5 billion in the third quarter (see Figure 6).
Annex D (27 Kb Excel sheet) contains growth rates back to Q1 2012.
The gross domestic product implied deflator at market prices for the fourth quarter of 2012 is 1.1% above the same quarter of 2011 (see Figure 7). The GDP implied deflator is calculated by dividing current price GDP by chained volume 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 (21 Kb Excel sheet) contains growth rates back to Q1 2012.
GDP at current market prices rose by 0.1% in 2012 quarter four. In 2012 quarter three GDP at current market prices rose by 1.6%.
Compensation of employees increased by 0.1% in 2012 quarter four. This follows an increase of 0.5% in 2012 quarter three (see Figure 8). In the year 2012 compensation of employees increased by 2.7%.
The gross operating surplus of corporations, including the alignment adjustment, decreased by 1.9% in 2012 quarter four, following an increase of 4.1% in 2012 quarter three (see Figure 9). In the year 2012 gross operating surplus of corporations, including the alignment adjustment fell by 3.1%.
Taxes on products and production less subsidies increased by 3.0% in 2012 quarter four following an increase of 0.6% in 2012 quarter three. In 2012 as a whole taxes on products and production less subsidies increased by 0.3%.
GDP decreased by 0.3% in the fourth quarter of 2012, unrevised from the preliminary estimate. The economic story for the quarter is unchanged from the previous estimate, with the decline mainly reflecting three factors: maintenance at the UK’s largest North Sea oil field, a ‘fall-back’ effect from the Olympic and Paralympic Games and underlying weak domestic demand.
North Sea oil field maintenance has had a clear effect in the ‘mining & quarrying including oil & gas extraction’ industry, with an 11.0% fall in quarterly growth, a downward revision of 0.8 percentage points from the preliminary estimate. The fall-back from the Olympic and Paralympic Games is less evident, but is suggested by a quarterly decline of 5.1% in ‘other services’, the sector which contained Olympic ticket sales during the third quarter.
Domestic demand is relatively flat on the quarter, with household final consumption expenditure showing only slight growth of 0.2% from the third quarter. The income components of GDP reveal one of the most pressing sources of the continued weak demand, where slow growth in compensation of employees is likely to be restricting households’ spending power. Further, the lack of demand can be seen in corporations’ gross operating surplus data; although the Olympic and Paralympic Games and the Diamond Jubilee had an effect on the growth figures throughout the year, the level of gross operating surplus was roughly the same as it was in the first quarter.
ONS published 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 7 March 2013.
In the fourth quarter of 2012, GDP fell by 0.6% in the euro area and by 0.5% in the European Union as a whole (EU 27), (see Figure 10). These are based upon flash estimates of GDP for the fourth quarter of 2012 published by Eurostat, the statistical office of the European Union. In the third quarter of 2012, GDP decreased by 0.1% in the euro area, and increased by 0.1% in the European Union.
Compared with the fourth quarter of 2011, seasonally adjusted GDP in the euro area fell by 0.9%. In the European Union as a whole, GDP was 0.6% lower than in the fourth quarter of 2011.
GDP for the United States of America was unchanged in the fourth quarter of 2012, following an increase of 0.8% in the previous quarter. GDP for Japan decreased by 0.1% in the fourth quarter of 2012, following a 1.0% fall in the third quarter.
When compared with the same quarter a year ago, GDP for the United States of America rose by 1.5% and GDP for Japan increased by 0.3%.
The preliminary estimate of GDP released on 25 October 2012 included a description of where Olympic and Paralympic Games effects may have been seen in the output components of GDP. This section will describe possible effects of the games on expenditure and income approaches. As previously stated, it is not possible to quantify these effects, as there may have been offsetting positive and negative effects on different components and in different parts of the UK.
The most obvious effect is that of ticket sales, which are included in household final consumption expenditure (for domestic ticket-buyers) and exports (for non-UK residents). There may also have been a different pattern of household consumption by product category caused by the Olympics. Spending on categories such as hotels & restaurants and transport may have been affected because those not attending the games consumed these services differently during the games period. There may also have been some people who chose not to travel at all during the games period. Additionally a small upward effect on government final consumption expenditure may have resulted from the Games. As well as the ticket sales already mentioned, it might be expected that there would be additional exports of both goods and services from the UK from those non-residents visiting during the Olympic and Paralympic Games.
There may have been an effect on the gross operating surplus of corporations, both as a result of Olympic and Paralympic ticket sales and also due to extra sales from corporations providing goods and services to spectators. The compensation of employees figure may have been affected if employers had to recruit extra staff to meet extra demand, although some employers may have just redeployed existing staff from other parts of their organisations.
The effects of the Olympic and Paralympic Games are not easily identifiable in the GDP data and are not all in the same direction. A detailed article (229 Kb Pdf) describing possible effects, comparing with earlier Olympic Games was published by ONS on 25 October 2012.
The earliest period open for revision in this release is Q1 2012 (see Figure 11).
Output revisions are shown in Annex E (26.5 Kb Excel sheet) of this release.
Expenditure revisions are shown in Annex F (24.5 Kb Excel sheet) of this release.
There are larger than usual revisions to business investment in this release. The addition of the Q4 2012 data called into question the seasonal adjustment model and this led to an immediate and urgent review. The conclusion from this review was that the seasonal adjustment model had to be updated and this has affected the estimates for periods from Q1 2012 (the span currently open for revision). This has led not only to revisions to business investment but also to the gross capital formation deflator, which has contributed to the revisions to the implied GDP deflator, particularly in Q2 2012. For these reasons, the estimates for current price gross fixed capital formation and the implied GDP deflator are subject to greater uncertainty than usual. However, GDP in chained volume terms is unaffected and the estimates for business investment have been improved.
Given the issues this month, the seasonal adjustment will be reviewed again when additional data are received. This could lead to revisions in the Quarterly National Accounts publication in March 2013, when both 2011 and 2012 are open for revision.
Users should also be aware of the ongoing programme of development of the National Accounts systems, which will lead to further improvements in the methods for estimating gross fixed capital formation. A full update of the seasonal adjustment will be undertaken when the updated methods are introduced. Details of the ongoing development and the improvements that will be implemented will be published in an article in March 2013.
Income revisions are shown in Annex G (21.5 Kb Excel sheet) of this release.
This release includes data available up to 14 February 2013. Data are consistent with the Index of Production statistical bulletin published on 7 February 2013 and the trade in goods data within the UK Trade statistical bulletin published on 7 February 2013.
A full set of quarterly national accounts for the fourth quarter of 2012 will be published on 27 March 2013. A preliminary estimate of GDP for the first quarter of 2013 will be published on 25 April 2013. The second estimate of GDP for the first quarter of 2013 will be published on 23 May 2013.
Release content and context
This release is 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.
Measuring the impact of the 2012 Olympic and Paralympic games in the National Accounts
An article titled 'Measuring the impact of the Olympics in the National Accounts' (115.6 Kb Pdf) is available on the ONS' website which describes ONS' approach to ensuring that the planning, organising and economic activities associated with staging the games are recorded and recognised within the National Accounts.
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.
Historic experience shows that the output approach provides the best short term measure 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 'Interpretating 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 the Blue Book 2013' (62.7 Kb Pdf) was published by ONS on 30 November 2012. It includes forthcoming changes and outlines future plans for subsequent Blue and Pink Books.
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.
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 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 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 2008 (2007 Q4) to November 2012 (2012 Q3). The analysis of revisions between month 2 and month 3 uses month 3 estimates published from March 2008 (2007 Q4) to December 2012 (2012 Q3).
|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||-0.03||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 March 2005 (2004 Q4) to December 2009 (2009 Q3) 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||-0.10||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 of revisions to quarterly GDP' (206.7 Kb Pdf) , published in October 2012, is available on the ONS' website.
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 the fourth quarter of 2012 indicate that, for 2012 quarter four, the level of expenditure was higher than that of output and the level of income was lower than that of output.
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 (51.1 Kb Pdf) to the contents of this bulletin.
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