Statistical bulletin: Second Estimate of GDP Q4 2011

The headline figures are:

• UK gross domestic product (GDP) in volume terms decreased by 0.2 per cent in the fourth quarter of 2011
• Output of the production industries fell by 1.4 per cent, within which manufacturing fell by 0.8 per cent
• Output of the service industries was unchanged, while output of the construction industry fell by 0.5 per cent
• Household final consumption expenditure increased by 0.5 per cent in volume terms in the latest quarter
• In current price terms, compensation of employees fell by 0.3 per cent in the fourth quarter of 2011

Summary

This bulletin contains information on the second estimate of GDP for 2011 quarter four. It includes information on the expenditure and income approaches to GDP for the first time, along with revisions to and more detail on the output approach.

Key Data Q4 2011

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

Output indices, CVM

Source: Office for National Statistics

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See Annex A (3.07 Mb Excel sheet) for growth rates back to 2011 Q1.

The output of the agriculture, forestry & fishing sector decreased by 1.5 per cent in the fourth quarter of 2011 compared with a decrease of 0.6 per cent in the third quarter of 2011.

The output of the production industries fell by 1.4 per cent in the fourth quarter of 2011. In the third quarter of 2011 output of the production industries was flat. In the year 2011, output of the production industries fell by 1.3 per cent. 

Mining & quarrying output decreased by 2.0 per cent in the latest quarter. This compares with a decrease of 0.4  per cent in the previous quarter.

Manufacturing output fell by 0.8 per cent in the latest quarter. 

 

Manufacturing growth, quarter on quarter growth, CVM

Source: Office for National Statistics

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Electricity, gas, steam & air conditioning supply decreased by 5.1 per cent in 2011 quarter four compared with an increase of 1.7 per cent fall in 2011 quarter three.

Water supply, sewerage & waste management decreased by 1.3 per cent in the fourth quarter of 2011 compared with a decrease of 0.4 per cent in the third quarter of 2011.

Construction output is estimated to have decreased by 0.5 per cent in 2011 quarter four. This compares with an increase of 0.3 per cent in 2011 quarter three. In the year 2011. construction output increased by 2.7 per cent.

Services output was unchanged in the fourth quarter of 2011 compared with an increase of 0.8 per cent in the third quarter of 2011. For the year 2011, services output increased by 1.6 per cent. 

Services, quarter on quarter growth, CVM

Source: Office for National Statistics

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Output of the distribution, hotels & restaurants sector fell by 0.6 per cent in 2011 quarter four. Weakness in wholesale and motor trades was only partially offset by an increase in retail.

Output of the transport, storage & communication sector fell by 0.1 per cent in 2011 quarter four, compared with an increase of 0.6 per cent in 2011 quarter three. The decline was mainly driven by weakness in computing and land transport.

Output of the  business services & finance sector rose by 0.1 per cent in 2011 quarter four, compared with an increase of 1.3 per cent in 2011 quarter three. The main drivers behind  growth in 2011 quarter four were employment activities and architectural engineering.

Output of government & other services rose by 0.3 per cent in 2011 quarter four, compared with an increase of 0.5 per cent in 2011 quarter three. The main drivers behind the growth in 2011 quarter four were human health activities and education.

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

See Annex B (3.06 Mb Excel sheet) for growth rates back to 2011 Q1.

Gross domestic expenditure decreased by 0.7 per cent in the fourth quarter of 2011.

Household final consumption expenditure increased by 0.5 per cent in 2011 quarter four, compared with a decrease of  0.1 per cent in 2011 quarter three. The level of household expenditure is now 0.6 per cent lower than in 2010 quarter four. For the year 2011, household final consumption expenditure fell by 0.8 per cent. 

 

Household final expenditure, quarter on quarter growth, CVM

Source: Office for National Statistics

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Government final consumption expenditure increased by 1.0 per cent in 2011 quarter four, compared with a decrease of 0.3 per cent in 2011 quarter three. In 2011, government final consumption expenditure increased by 0.3 per cent.

Gross fixed capital formation fell by 2.8 per cent in the latest quarter, compared with a fall of 1.0 per cent in the previous quarter. In the year 2011, gross fixed capital formation fell by 1.7 per cent. 

Gross fixed capital formation, quarter on quarter growth, CVM

Source: Office for National Statistics

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Including the alignment adjustment, the level of inventories increased by £1.0 billion in the latest quarter. In the year 2011, the level of inventories increased by £3.7 billion.

The deficit in net trade was £2.5 billion in 2011 quarter four, compared with a deficit in net trade of £4.4 billion in 2011 quarter three. 

Net trade , quarter on quarter growth, CVM

Source: Office for National Statistics

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GDP implied deflator

See Annex D (3.07 Mb Excel sheet) for growth rates back to 2011 Q1.

The gross domestic product implied deflator at market prices for 2011 quarter four is 2.3 per cent above the same quarter of 2010. 

  

GDP Implied Deflator, quarter on quarter of previous year, CVM

Source: Office for National Statistics

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GDP analysed by income categories at current prices - Table D

See Annex C (3.06 Mb Excel sheet) for growth rates back to 2011 Q1.

GDP at current market prices rose by 0.5 per cent in 2011 quarter four, compared with an increase of 1.1 per cent in 2011 quarter three.

Compensation of employees fell by 0.3 per cent in 2011 quarter four, compared with an increase of 0.7 per cent in 2011 quarter three. In the year 2011, compensation of employees increased by 1.4 per cent. 

 

Compensation of employees, quarter on quarter growth, current prices

Source: Office for National Statistics

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The gross operating surplus of corporations rose by 2.0 per cent in 2011 quarter four, compared with a rise of 0.8 per cent in 2011 quarter three. In the year 2011, gross operating surplus of corporations rose by 2.7 per cent.

 

Gross operating surplus of corporations, quarter on quarter growth, current prices

Source: Office for National Statistics

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 Taxes on production less subsidies decreased by 0.1 per cent in 2011 quarter four compared with a fall of 3.6 per cent in 2011 quarter three. In 2011 as a whole, taxes on production less subsidies increased by 8.4 per cent.

Economic background

GDP over the year grew by 0.8 per cent, compared with 2.1 per cent for 2010. The economy has now recovered just under half of the output lost during the 2008-09 downturn - growth of 3.4 per cent since the end of the contraction, during which GDP declined by more than 7 per cent.

The subdued economic environment and sentiment continued into the last quarter of 2011, with a number of key economic indicators, in addition to GDP, reflecting the adverse economic conditions in the UK, as well as in the euro area. The relatively small expenditure statistical discrepancy in 2011 indicates that the data from the output and expenditure approaches are broadly consistent.

Household expenditure growth was positive having been negative or flat for the previous five quarters, so the relative strength of growth seen in the fourth quarter may reflect some demand which had not been exercised in the previous five quarters. According to the retail sales index (RSI), which is one of the main data sources for household expenditure, widespread discounting by retail outlets during the autumn pushed up volumes of sales of food as well as clothing and footwear, which were two of the sources of strength in household expenditure in the fourth quarter. Despite the improvement in household expenditure in the fourth quarter, households were nevertheless facing difficult economic and financial conditions, with rising unemployment, weak employment conditions and modest wage growth which remained well below inflation during the fourth quarter.

The improvement in the contribution from net trade was a change from the previous two quarters of negative contributions. The improvement was generated mainly by an improvement in exports, primarily to non-EU trade partners, as well as some weakening in imports, particularly of services. Weaker imports of semi-manufactures and basic materials reflected the moderation in manufacturing growth during the second half of 2011.

The smaller contribution from inventories, or stocks, partly reflects some adjustment to the previous quarter's significant stock building, but also perhaps reflects the stronger growth in household expenditure (domestic demand) and exports which could have reduced stockbuilding.

Compensation of employees, the main component of the income approach, in currect prices, declined in the fourth quarter but was still stronger than in the same quarter a year ago.

Revisions

GDP and components

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 2011.

GDP growth for 2011 quarter four is unrevised from the decrease of 0.2 percentage points published last month. There has been  downward revision of 0.1 percentage point to 2011 quarter three, no revision to 2011 quarter two and a downward revision of 0.1 percentage point to 2011 quarter one. 

Gross domestic product, quarter on quarter growth, CVM

Source: Office for National Statistics

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Output components (previously published on 25 January 2012)

Growth in th volume of output in the production industries for 2011 quarter four has been revised down by 0.2 percentage points from the estimate published last month. Growth in manufacturing output for 2011 quarter four has been revised up by 0.1 percentage points. The 2011 quarter three estimate of production output has been revised down by 0.2 percentage points. The 2011 quarter one estimate of production output has been revised down by 0.2 percentage points.

The volume of output in the service industries in 2011 quarter four is unrevised. In 2011 quarter four growth in distribution, hotels and restaurants has been revised down by 0.1 percentage points. Growth in business services and finance in 2011 quarter four has been revised up by 0.1 percentage points. In 2011 quarter four, growth in government and other services has been revised down by 0.1 percentage points. The 2011 quarter three estimate of services output has veen revised up by 0.1 percentage points. The 2011 quarter one estimate of services output has been revised up by 0.1 percentage points.

The volume of output in the construction industries is unrevised in 2011 quarter four. Construction output has been revised down by 0.3 percentage points in 2011 quarter two. In 2011 quarter one construction output has been revised down by 0.1 percentage points.

In addition to these revisions, the series for market sector gross value added (L48H) has been revised back to the start of 1997. This follows the discovery of a processing error in the data previously published. No other components or aggregates are affected by this revision.

Expenditure components chained volume measure (previously published on 22 December 2011)

Growth in household final consumption expenditure has been revised down by 0.1 percentage points for 2011 quarters three, two and one from the estimate published in December 2011.

Growth in general government final consumption expenditure has been revised down by 0.5 percentage points for 2011 quarter three and revised down by 0.7 percentage points for 2011 quarter one.

Growth in gross fixed capital formation has been revised down by 2.3 percentage points for 2011 quarter three; revised up by 1.3 percentage points for 2011 quarter to and revised up by 1.7 percentage points for 2011 quarter one.

Income components (previously published on 22 December 2011)

Growth in compensation of employees has been revised down by 0.3 percentage points for 2011 quarter three. For 2011 quarter two compensation of employees growth was revised up by 0.1 percentage points and down by 0.2 percentage points for 2011 quarter one.

Growth in the gross operating surplus of corporations in 2011 quarter three was revised up by 0.7 percentage points. In 2011 quarter two gross operating surplus of corporations growth was revised down by 1.5 percentage points and revised down by 0.9 percentage points in 2011 quarter one.

Background notes

1. This release includes data available up to 16 February 2012. Data are consistent with the Index of Production statistical bulletin published 9 February 2012 and the Trade in Goods data within the UK Trade Statistical Bulletin published 9 February 2012.

2. A full set of quarterly national accounts for the fourth quarter of 2011 will be published 28 March 2012. A preliminary estimate of GDP for the first quarter of 2012 will be published 25 April 2012.

3. As a result of a review of the content and presentation of GDP statistical bulletins and following consultation with key users, ONS has made some presentational changes to this release. For table G the detailed breakdown of changes in inventories in the latest quarter is no longer available. An additional table, equivalent to table M in the quarterly national accounts bulletin (quarterly alignment adjustments), is now included. Additionally, in this and 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 relevant components - changes in inventories and gross operating surplus.

4. During April 2012 ONS will publish the first of a regulsr series of quarterly releases focusing on the Household sector. Ahead of this new publication improvements are being made to the method of calculating 'per head' statistics within the next publication of the United Kingdom Economics Accounts (28 March 2012). ONS will also take this opportunity to reinstate longer time series for all 'per head' series.

5. An article titled Treatment of the Sale of Olympic Tickets (19.1 Kb Pdf) in the National Accounts is available on the National Statistics website.

6. A Summary Quality Report for this Statistical Bulletin can be found on the National Statistics website.

7. 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.

8. 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 times 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 realiability 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 that the test is significant.

9. 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 March 2007 (2006q4) to December 2011 (2011 q3).  

   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	-0.2	0.01	0.05
   Between M2 and M3	-0.2	-0.03	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 March 2004 (2003q4) to December 2008 (2008q3) for GDP.

   Table 2: Revisions to month 3 estimates of GDP growth

   		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)	-0.2	-0.16	0.29

   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 National Statistics 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', was first published in December 2009, is available on the National Statistics website.

10. 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.

11. Latest copies of this and other ONS releases are available under Press Releases on the ONS website.

    ONS has also produced a short guide to the UK National Accounts. 

12. 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 (47.1 Kb Pdf) of those given pre-publication access to the contents of this bulletin.

13. Follow us on Twitter or join us on Facebook.

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14. National Statistics are produced to high professional standards set out in the UK Statistics Authority's Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

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    Next publication:  28 March 2012

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15. 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 

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

    Revisions tables 

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

16. 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.

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