Output and earnings growth are both weak
The quarterly national accounts dataset consistent with Blue Book 2012 contains a number of revisions to annual and quarterly GDP data. These are attributable to four main causes:
An important methodological change in the way insurance services are treated in the national accounts.
Change in deflation methods per-1997.
In 2009 and 2010, the revisions also reflet the new HMRC earnings data and other updated data including the ONS Annual Business Survey (ABS).
Chained volume estimates for all years are affected to a minor degree by the annual updating of the base and reference years.
As a result the annual and quarterly GDP growth rates have been revised.
The fall in GDP of 0.3 per cent in both 2012 Q1 and the fourth quarter of 2011, means that total output has declined by 0.7 per cent over the last two quarters. The economy has contracted by 0.2 per cent over the past year. Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by 0.2 per cent.
The fall in GDP in the latest quarter (compared to the previous quarter) reflects weakness in construction output, which fell by 4.9 per cent. The service sector grew by 0.2 per cent while output of the production industries fell by 0.5 per cent.
Reflecting the subdued economic environment, annual average earnings growth (total pay) has also been weak in the first quarter at 0.9 per cent. In the services sector, annual earnings rose by 0.9 per cent in the three months to March, compared with estimated output growth of 1.0 per cent over the same period. For construction, annual earnings fell 0.3 per cent compared with a fall in output of 4.0 per cent, while manufacturing earnings increased by 0.8 per cent against a 1.4 per cent drop in output.
Steady full-time employment in recent quarters mirrors flat GDP growth
The labour market statistics show an increase in employment of 0.4 per cent between the final quarter of 2011 and the first quarter of 2012. The increase in employment was entirely driven by additional part time workers, with full time employment falling very slightly. Total weekly hours worked increased by 0.9 per cent in the latest quarter, as the rising employment level was accompanied by a 0.5 per cent increase in average weekly hours worked. In particular, there was an increase in the average hours worked by part-time workers of 1.3 per cent.
Since the start of the 2008 recession, employment has responded more slowly to changes in GDP growth than might be expected on the basis of experience from previous economic downturns. There are many possible reasons for this, such as greater flexibility in the response of hours worked, the degree of part-time working, and earnings growth. There has been a substantial move towards more part time or temporary workers over the last four years. Furthermore, the relatively weak wage growth over the last four years may reflect another way in which the labour market has adjusted to the weak economic conditions.
Source: Office for National Statistics
Gross Domestic Product (ABMI): chained volume measures, seasonally adjusted, Office for National Statistics. Gross Domestic Product quarter on quarter previous year growth (IHYR): chained volume measures, seasonally adjusted, Office for National Statistics.
Total people working full time (YCBE): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Total people working part time (YCBH): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Temporary employees(YCBZ): Labour Force Survey, all those aged 16 and over, seasonally adjusted, Office for National Statistics. Average weekly earnings total pay growth (KAC3): Monthly Wages and Salaries Survey, seasonally adjusted, Office for National Statistics.
GDP estimate for quarter one from 'Quarterly National Accounts - Q1 2012' published on 28 June 2012.
Most recent Labour Market estimates are available from the ‘Labour Market Statistical Bulletin’ published on 20 June 2012.
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