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 (SA) 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 third estimate of GDP for Q4 2013 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. In line with national accounts revisions policy, the earliest period open for revision in this release is Q1 2012.
|Gross Domestic Product|
|Households' saving ratio||Real households' disposable income||Current market prices||Chained volume measure||Chained volume measure|
Figure 1 shows the quarterly path of GDP over the last 25 years. It shows the steady economic growth in the UK from the mid 1990s through to 2008 when, partly due to a financial market shock, the UK suffered an economic downturn. Figure 2 compares economic downturns since the 1970s and shows that the most recent downturn was the deepest, with GDP falling by 7.2% between its peak in Q1 2008 and its trough in Q2 2009. GDP remains 1.4% below the pre downturn peak following the latest unrevised GDP estimate with signs of the recovery strengthening, especially in 2013.
The latest figures for Q4 2013 show GDP in chained volume measures increasing by 2.7% between Q4 2012 and Q4 2013 and by 0.7% between Q3 2013 and Q4 2013. GDP in current prices has also grown, up 4.0% between Q4 2012 and Q4 2013 and up 1.6% between Q3 2013 and Q4 2013. There have been encouraging signs recently across the three approaches to measuring GDP. For the output approach, services output has now surpassed its pre downturn peak; the expenditure approach has seen strong growth in gross fixed capital formation while the income approach has seen compensation of employees rising for the thirteenth consecutive month.
Annex A (28.5 Kb Excel sheet) contains growth rates back to Q1 2012.
Total production output grew by 0.5% in Q4 2013 compared with Q3 2013, unrevised from the Second Estimate of GDP published on 26 February 2014. The largest production component, manufacturing, increased by 0.6% between Q3 2013 and Q4 2013 revised down 0.1 percentage points from the previous estimate. Between Q2 2013 and Q3 2013 manufacturing output rose by 0.8% (see Figure 3). Mining and quarrying including oil & gas extraction was the only industry to decrease in this period, falling by 1.8%. When comparing Q4 2013 with Q4 2012, production output rose by 2.2%. Electricity, gas, steam & air conditioning was the only production industry to decrease in the same period, falling by 5.0%.
Construction output fell by 0.2% in Q4 2013, revised down from the previously estimated 0.2% increase and follows a 2.6% increase in the previous quarter. When compared with Q4 2012, construction output increased by 3.4%.
The service industries grew by 0.8% in Q4 2013, unrevised from the previous estimate (see Figure 4) following a 0.7% increase in Q3 2013, revised down 0.1 percentage points from the previous estimate. There were across the board increases for all high level service industries in the latest quarter. Service industries output has increased in every quarter compared with the same quarter a year ago since Q2 2010.
Breaking down the service industries, output of the distribution, hotels & restaurants industries rose by 0.5% in Q4 2013, unrevised from the previous estimate. The 0.5% increase in the latest quarter was largely due to increases in wholesale & retail trade & repair of motor vehicles & motorcycles. In Q3 2013 distribution, hotels & restaurants industries output increased by 1.2%.
Output of the transport, storage & communication industries rose by 0.4% in Q4 2013 following a 0.1% decrease in Q3 2013. The largest upward contribution to growth in Q4 2013 came from computer programming, consultancy & related activities.
Business services & finance industries output rose by 1.0% in Q4 2013, revised downwards by 0.2% from the previous estimate. The increase in Q4 2013 was mainly due to employment activities. In Q3 2013 business services & finance output rose by 1.1%.
Output of government & other services rose by 0.8% in Q4 2013, a revision of 0.2 percentage points from the previous estimate, following an unrevised 0.4% increase in Q3 2013. The increase in Q4 2013 was mainly due to activities of households as employers of domestic personnel.
Further detail on the service industries lower level components can be found in the Index of Services statistical bulletin published on the same day as this release.
Gross value added excluding oil & gas extraction rose by 0.7% in Q4 2013, unrevised from the previous estimate, following a 0.8% increase in Q3 2013.
Figure 5 shows the components of the output approach to measuring GDP indexed to Q1 2008=100. The service industries surpassed their Q1 2008 peak in Q3 2013 and have now surpassed their pre downturn peak by 1.1% having grown by 2.5% between Q4 2012 and Q4 2013. However, the production industries remain 12.1% below their pre downturn peak, with manufacturing 8.9% lower. Both production and manufacturing have grown positively between Q4 2012 and Q4 2013, with production growing by 2.2% and manufacturing by 1.8%. Similarly, construction remains 12.5% below the Q1 2008 peak but has been more positive in 2013, growing by 3.4% since Q4 2012. Q4 2013 has seen positive quarter on quarter growth in the services and production industries with growths of 0.8% and 0.5% respectively.
Annex B (35.5 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) fell by 0.3% in Q4 2013, which has been revised down 0.6 percentage points from the previous estimate. This follows a 1.9% increase in Q3 2013.
Household final consumption expenditure, the largest component of gross domestic expenditure rose by 0.4% in Q4 2013 and has increased for nine consecutive quarters (see Figure 6). The largest increases in household final consumption expenditure in Q4 2013 came from clothing & footwear; housing, water, electricity, gas & other fuels and furnishings & household equipment. Household final consumption expenditure when compared with the same quarter a year ago has been rising each quarter since Q1 2012 and was 2.2% higher in Q4 2013 than in the same period a year ago. Annually, between 2012 and 2013 household final consumption expenditure also increased by 2.2%, and has been revised down by 0.2 percentage points since the previous estimate. This remains the highest annual growth rate since 2007.
ONS announced on 18 February 2014 the introduction of a new method for deriving rental data in the calculation of Household Final Consumption Expenditure in the National Accounts. More information on these changes is given in the Revisions to GDP Estimates section of the Background Notes accompanying this release.
Government final consumption expenditure was flat in Q4 2013, revised down 0.3 percentage points from the previous estimate. This follows an increase of 0.6% in Q3 2013. In 2013 government final consumption expenditure increased by 0.7%, revised down 0.2 percentage points from the previous estimate.
Non-profit institutions serving households (NPISH) final consumption expenditure fell by 1.5% in Q4 2013 revised up from the previously estimated 7.3% fall. This follows a decrease of 1.9% in Q3 2013. In 2013 NPISH final consumption expenditure increased by 3.2%, an upward revision of 1.2 percentage points from the previously published figure.
Gross fixed capital formation (the purchase and disposal of fixed assets used in the production process for more than a year) increased by 1.9% in Q4 2013 (see Figure 7), a downward revision of 0.5 percentage points from the previous estimate. This follows an increase of 1.9% in Q3 2013, revised up from the previously estimated 1.7% increase. In 2013 gross fixed capital formation fell by 0.6%, a downward revision of 0.1 percentage points from the previous estimate. Within gross fixed capital formation, business investment increased by 2.4% in Q4 2013, unrevised from the previous estimate.
More detail on gross fixed capital formation is available in the Business Investment statistical bulletin published on the same day as this release.
Excluding the alignment adjustment, the level of inventories rose by £2.8 billion in Q4 2013, following an increase of £4.4 billion in Q3 2013. Including the alignment adjustment, the level of inventories increased by £1.9 billion in Q4 2013, following an increase of £5.0 billion in Q3 2013.
The trade balance deficit has almost halved between Q3 2013 and Q4 2013, decreasing from £8.0 billion in Q3 2013 to £4.2 billion in Q4 2013 (see Figure 8) with exports increasing by 2.8% and imports falling by 0.4% between Q3 and Q4 2013.
Exports of goods rose by 0.9% in Q4 2013, due to an increase in manufactured goods; specifically finished manufactures. Exports of services rose by 5.5% in Q4 2013 mainly due to an increase in financial services. In Q4 2013 imports of goods fell by 1.7% due to a decrease in fuels and oil imports in particular. Imports of services increased by 4.0% in Q4 2013 mainly due to an increase in financial services. The trade position reflects exports minus imports. The deficit in the trade balance was £20.0 billion in 2013. Between 2012 and 2013 exports increased by 1.0% and imports by 0.5%.
Figure 9 shows the quarterly contribution of the expenditure components to GDP growth in chained volume measures, seasonally adjusted since Q1 2012. Gross fixed capital formation and household final consumption expenditure both made positive contributions to quarter on quarter GDP growth, contributing 0.3 and 0.2 percentage points respectively. The trade balance contributed 1.0 percentage points to GDP growth in Q4 2013, its largest contribution since Q4 2011. Exports had the strongest quarterly growth of any expenditure component, quarter on previous quarter, at 2.8% while imports contracted by 0.4%.
Annex D (25.5 Kb Excel sheet) contains growth rates back to Q1 2012.
The gross domestic product implied deflator at market prices for Q4 2013 is 1.3% above the same quarter of 2012 (see Figure 10) and increased by 1.8% in 2013 as a whole. 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; the deflators for expenditure components, which are the basis for the implied GDP deflator, are used to calculate nominal GDP not real GDP.
Annex C (32.5 Kb Excel sheet) contains growth rates back to Q1 2012.
GDP at current market prices rose by 1.6% in Q4 2013, a downward revision of 0.3 percentage points from the previous estimate following a 1.5% increase in Q3 2013. In 2013 GDP at current market prices rose by 3.5%, an upwards revision of 0.1 percentage points from the previous estimate.
Compensation of employees – which includes both wages & salaries and pension contributions - increased by 0.3% in Q4 2013, the thirteenth successive increase. This follows an increase of 0.2% in Q3 2013 (see Figure 11). In 2013 compensation of employees rose by 3.2%, the highest annual growth rate since 2007.
The gross operating surplus of corporations – effectively the profits of companies operating within the UK – including the alignment adjustment, rose by 5.4% in Q4 2013 compared with the previous quarter, revised down from the previously estimated 6.6% increase. This follows an increase of 4.4% in Q3 2013 (see Figure 12). Between 2012 and 2013 gross operating surplus of corporations, including the alignment adjustment, rose by 3.7%, revised up from the previously estimated 3.2% increase.
On an unaligned basis private non-financial corporations’ operating surplus rose by 2.2% following a 5.6% increase in Q3 2013. Private non-financial corporations’ operating surplus on an aligned basis rose by 4.9% in Q4 2013 following an increase of 4.6% in Q3 2013.
Taxes less subsidies on products and production rose by 1.1% in Q4 2013, following an increase of 3.4% in Q3 2013. In 2013 taxes less subsidies on products and production increased by 4.8%, unrevised from the previous estimate.
Figure 13 shows the contribution made by income components to current price GDP during 2013.
Gross operating surplus provided the strongest contribution to GDP growth quarter on quarter followed by mixed income, compensation of employees and finally taxes less subsidies on products and production.
Annually for 2013, the central government, local government, financial corporations and household sectors were net borrowers. Public corporations, private non-financial corporations and the rest of the world sectors were net lenders.
In Q4 2013, the central government, local government, financial corporations and household sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders (see Figure 14).
Compared to the previous quarter, there has been a switch to net lending in the private non-financial corporations sector and a switch to net borrowing in the financial corporations sector. All other sectors remain unchanged.
See table I for further detail.
Annually for 2013, the saving ratio was 5.1% compared with 7.3% in 2012.
The saving ratio in Q4 2013 was 5.0% compared with 5.6% in the previous quarter. This decrease was due to a rise in household final consumption expenditure (see Figure 15).
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 are included.
For the year 2013, real household disposable income decreased by 0.5% following a rise of 2.5% in 2012. This reflects an increase of 1.7% in nominal gross disposable income offset by a rise of 2.2% in the household and NPISH final consumption deflator. This increase in nominal gross disposable income was due to a rise in wages and salaries and social benefits, partially offset by increased taxes in income and wealth.
The level of real household disposable income decreased by 0.1% in Q4 2013 following a rise of 0.6% in the previous quarter (see Figure 16). This decrease in the latest quarter is due to a 0.7% rise in nominal gross disposable income offset by an increase of 0.8% in 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 £7.7 billion in Q4 2013 following net borrowing of £0.4 billion in the previous quarter. This switch to net lending in the latest quarter was due to a rise in gross operating surplus of £3.2 billion and a rise in net property income of £2.8 billion.
For the year 2013, net lending was £23.2 billion following net lending of £29.7 billion in 2012. This decrease was due to a fall in net property income offset by a rise in gross operating surplus.
In Q4 2013, GDP grew by an unrevised 0.3% quarter on quarter in the Euro area, while the European Union (EU 28) (see Table 2) also saw accelerated quarterly growth for Q4 2013, increasing by 0.4% quarter on quarter (see Figure 17) and by 1.1% on the same quarter of the previous year (see Figure 18). The European Union grew by 1.0% in Q4 2013 compared to Q4 2012. The United States of America saw quarterly growth of 0.6% in Q4 2013, revised down 0.2 percentage points from the 0.8% in the second estimate, while Japan was also revised down by 0.1 percentage points, increasing by 0.2% in Q4 2013. Both the US and Japan grew by 2.5% when compared to the same quarter of the previous year.
|EU28||Eurozone||France||Germany||Japan||United Kingdom||United States of America|
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 earliest period open for revision in this release is Q1 2012 (see Figure 20).
Detailed revisions for the three GDP approaches are shown in the Annexes listed.
Output revisions are shown in Annex E (34.5 Kb Excel sheet) of this release.
Expenditure revisions are shown in Annex F (28.5 Kb Excel sheet) of this release.
Income revisions are shown in Annex G (25 Kb Excel sheet) of this release.
Sector accounts revisions are shown in Annex H (36.5 Kb Excel sheet) of this release.
This release includes data available up to 13 March 2014. Data are consistent with the current price trade in goods data within the UK Trade statistical bulletin published on 14 March 2014 and the Index of Production statistical bulletin published on 11 March 2014.
Release content and context
This release includes 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 (QNA) 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 (27.8 Kb Pdf)
as further data, annual benchmarks and methodological improvements are implemented.
Changes to publication dates
To bring the Quarterly National Accounts (QNA) into line with the standard national accounts publication timetable the June Q1 2014 QNA publication date is being moved from Thursday 26 June 2014 to Friday 27 June 2014. This is in line with other related outputs which are now also being published on these revised dates.
Other forthcoming changes
To allow sufficient time to prepare for the major changes in Blue Book 2014, ONS has decided to change the approach to quarterly national accounts for Q2 2014. A preliminary estimate, based only on output data, will be published as normal in July. Then in August, this output-based estimate will be updated. This will supplement the July Preliminary GDP estimate by replacing the third month of forecast data for the Index of Production (IoP), the Index of Services (IoS) and the monthly construction output survey with actual data. The publication date for this output based estimate has also moved from the previously announced date to 15 August 2014. There will be no published information on the income or expenditure components in the second quarter until the Quarterly National Accounts release on 30 September 2014.
ONS has published an article informing users of the Content of the Blue Book and Pink Book 2014 (83.9 Kb Pdf) which is available on the ONS website.
ONS maintains a list of candidate special events in the Special Events Calendar. There were several special events in 2012. As explained in ONS’s Special Events Policy, it is not possible to separate the effects of special events from other changes in the series.
The flooding and storm damage that occurred in December 2013 has not been classified as a statistical special event.
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.
ONS has produced an article 'Interpreting the Recent Behaviour of the Economy' available on the ONS website to aid interpretation of 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 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 2 April 2014.
Basic Quality Information for GDP Statistical Bulletin
A Quality and Methodology Information report (518.9 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. Tables 3 and 4 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 3 shows the revisions to month 1 (preliminary) and month 2 (second) estimates of GDP. The analysis of revisions between month 1 and month 2 uses month 2 estimates published from May 2009 (Q1 2009) to February 2013 (Q4 2013). The analysis of revisions between month 2 and month 3 (third estimate of GDP) uses month 3 estimates published from March 2009 (Q4 2008) to December 2013 (Q3 2013).
|Estimate in 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||0.04||0.06|
|Between M2 and M3||0.7||-0.02||0.08|
Table 4 shows the revisions to GDP growth and the household saving ratio 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 2006 (Q4 2005) to December 2010 (Q3 2010) for GDP.
|Estimate in 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||-0.11||0.42|
|Household saving ratio||5.0||-0.95||1.21|
Revisions triangles for the main components of GDP from expenditure, output and income approaches and spreadsheets containing revisions to (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 'Revisions to GDP and Components' (513.5 Kb Pdf) , published on 28 January 2014, is available on the ONS website.
ONS has recently published real time databases on the ONS website for the income and expenditure components of GDP which will be regularly updated as part of an ongoing development programme to improve the coverage of the revisions triangles.
Extension of new method for deriving rental data in the calculation of Household Final Consumption Expenditure
With the publication of the Second Estimate of GDP, Q4 2013, ONS introduced a new method for deriving rental data in the calculation of Household Final Consumption Expenditure in the National Accounts. ONS are today extending this method back to Q1 2012 in line with the National Accounts Revision Policy (27.8 Kb Pdf) . In addition, further revisions have been made to the current price measure of Household Final Consumption Expenditure (HHFCE) on ‘Imputed Rental’ and ‘Actual Rental’ in all quarters of 2013. Both changes have brought the 2012 and 2013 quarter on corresponding quarter of the previous year growth for the household expenditure implied deflators for both measures of rental in line with the annual change in the equivalent Consumer Price Inflation including owner occupiers' housing costs (CPIH).
A recap of the further implications of this change on HHFCE and GDP can be found in the background notes section of the Second Estimate of GDP for Q4 2013.
Table 5 highlights the overall revisions to affected series in 2012 and 2013.
|HHFCE on Imputed and Actual Rental, current price||2012 - Reduced by £7.0 billion|
|2013* - Reduced by £18.0 billion|
|HHFCE implied deflator||CVM unchanged, CP reduced so deflator reduced|
|Implied GDP deflator||CVM unchanged CP reduced so deflator reduced|
|GOSH with recalculated Imputed rental||2012 - Reduced by £5.5 billion|
|2013* - Reduced by £14.9 billion|
|GDP Income, current price||2012 - Reduced by £5.5 billion|
|2013* - Reduced by £14.9 billion|
Introduction of Labour Force Survey (LFS) data in the calculation of Compensation of Employees (CoE)
As previously discussed, ONS are today introducing Labour Force Survey (LFS) data into the calculation of Compensation of Employees (CoE) in preference to Workforce Jobs (WFJ). The new method will use LFS employment, second jobs and HM Forces data to derive a quarterly growth rate to replace the existing WFJ growth.
WFJ will continue to be the preferred data source for industry breakdowns of employment as self classification in the LFS is thought to compromise the quality of the further detail. Therefore, a pro rate will then be applied to WFJ industry data so that the sum of WFJ industry growth is equal to LFS employment data + LFS second jobs data - HM Forces data. HM Forces data are deducted as an adjustment for this is made in the Wages and Salaries compilation process, informed by government administrative data.
The adjusted WFJ growth will then be multiplied by Average Weekly Earnings (AWE) at a broad industry level to form the calculation of Wages and Salaries in years where HMRC tax data on employees are not available.
WFJ data will continue to be interrogated alongside LFS data to inform the quality adjustments applied to Wages and Salaries during the GDP balancing process.
Revisions to data apply from Q1 2012 to Q4 2013, in line with the National Accounts Revision Policy (27.8 Kb Pdf) .
Table 6 sets out the revisions to the Wages and Salaries component of CoE specific to the introduction of LFS in the compilation process. Revisions are not equal to the total revisions to CoE shown in table R of this release. Total revisions to CoE reflect the change in method of Wages and Salaries (D.11) and standard revisions to the Social Contributions (D.12) component of CoE:
|Period||Revision (£ million)|
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 different data content of the three approaches dictates the approach taken in balancing quarterly data. In the UK, there are far more data available on output than in the other two approaches. However in order to obtain the best estimate of GDP (the published figure) the estimates from all three approaches are reconciled to produce an average.
Annually, the estimates from all three approaches are reconciled through the creation of Input-Output Supply Use tables for the years for which data are available.
For years in which there is no Supply Use balance, a Statistical Discrepancy exists which reflects the differences between the published headline estimate of GDP and the expenditure and income estimates.
For all periods, the expenditure and income estimates are aligned to the published headline GDP figure. Although annual data is aligned for balanced years there will still be quarterly differences for balanced and post balanced years, due to timing and data content issues. These are dealt with by means of explicit alignment adjustments which are applied to specific components (gross operating surplus of private non-financial corporations in the income approach and changes in inventories in expenditure) to align the three approaches. As these are purely quarterly discrepancies, the alignments sum to zero over the year and are published explicitly in the GDP statistical bulletins. They are also published as “of which” items within the specific components, to enable users to ascertain the underlying picture.
The size and direction of the quarterly alignment adjustments in Q4 2013 indicate that in this quarter the level of expenditure was higher than that of output while the level of income was lower than that of output.
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, slightly larger alignment adjustments are 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) .
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