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 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 Q4 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 earliest period open for revision in this release is Q1 2013.
|Current market prices||Chained volume measures|
|Gross domestic product||Compensation of employees||Gross domestic product||Household expenditure||Gross fixed capital formation|
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; however, the UK economy has shown signs of recovery, especially in 2013.
The latest figures for Q4 2013 show the recovery continuing with GDP in chained volume measures increasing by 2.7% between Q4 2012 and Q4 2013 and by 0.7% between Q3 2014 and Q4 2014. GDP in current prices has also grown, up 4.4% on Q4 2012 and up 1.9% on Q3 2013. There have been encouraging signs recently across the three approaches to measuring GDP, with services output now surpassing its pre downturn peak. For the expenditure approach, positive growth in the latest four quarters has been due to increases in household and government final consumption expenditure while increases for the income measure of GDP growth have been driven by strong growth in gross operating surplus.
Annex A (48.5 Kb Excel sheet) contains growth rates back to Q1 2012.
Output of the agriculture, forestry & fishing industries fell by 0.1% between Q3 and Q4 2013, revised down from the previously estimated 0.5% increase and was the only top level industry not to have increased in Q4 2013. This follows a decrease of 2.7% in Q3 2013.
Total production output grew by 0.5% in Q4 2013 compared with Q3 2013. Mining and quarrying including oil & gas extraction was the only industry to decrease in this period, falling by 1.9%. When comparing Q4 2013 with Q4 2012, production output rose by 2.3%. Electricity, gas, steam & air conditioning was the only production industry to decrease in the same period, falling by 5.1%.
Manufacturing output increased by 0.7% between Q3 2013 and Q4 2013 revised down 0.2 percentage points from the previous estimate (see Figure 3). Between Q2 2013 and Q3 2013 manufacturing output rose by 0.8%.
Construction output rose by 0.2% in Q4 2013, revised up from the previously estimated 0.3% decrease and follows a 2.6% increase in the previous quarter. When compared with Q4 2012, construction output increased by 4.3%.
The service industries grew by 0.8% in Q4 2013, unrevised from the previous estimate (see Figure 4) following an identical 0.8% increase in Q3 2013. There were across the board increases for all 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.
Figure 5 shows output components indexed to Q1 2008 (the pre downturn peak). Service industries output has now surpassed its pre downturn peak by 1.3%, having grown by 2.7% between Q4 2012 and Q4 2013. However, the production sector remains 12.3% below peak, with manufacturing now 8.8% below peak, although both production and manufacturing have experienced positive quarterly growth over the latest four quarters increasing by 2.3% and 1.9% respectively between Q4 2012 and Q4 2013. Similarly, construction is 11.3% below the Q1 2008 peak, but has had a more positive performance in 2013, growing by 4.3% since Q4 2012.
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 retail trade, except of motor vehicles & motorcycles and 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 0.5% 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 1.2% in Q4 2013, unrevised from the previous estimate and has now increased for seven consecutive quarters. 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 0.6% in Q4 2013, unrevised from the previous estimate, following a 0.4% increase in Q3 2013. The increase in Q4 2013 was mainly due to human health activities.
Further details 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 0.8% in Q4 2013 as in Q3 2013.
Annex B (38.5 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 Q4 2013, following a 2.0% increase in Q3 2013.
Household final consumption expenditure rose by 0.4% in Q4 2013 and has increased for nine consecutive quarters (see Figure 6). Household final consumption expenditure when compared with the same quarter a year ago has been rising each quarter since Q1 2012 and was 2.4% higher in Q4 2013 than in the same period a year ago. Annually, between 2012 and 2013 household final consumption expenditure also increased by 2.4% - the highest annual growth rate since 2007.
ONS announced on 18 February 2013 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 increased by 0.3% in Q4 2013 following an increase of 0.6% in Q3 2013. In 2013 government final consumption expenditure increased by 0.9%.
Non-profit institutions serving households (NPISH) final consumption expenditure fell by 7.3% in Q4 2013 following a 6.4% increase in Q3 2013. In 2013 NPISH final consumption expenditure increased by 2.0%.
Gross fixed capital formation (the purchase and disposal of fixed assets used in the production process for more than a year) increased by 2.4% in Q4 2013 (see Figure 7) following an increase of 1.7% in Q3 2013. In 2013 gross fixed capital formation fell by 0.5%. Within gross fixed capital formation, business investment increased by 2.4% in Q4 2013 following a 2.0% increase in Q3 2013.
More detail on gross fixed capital formation is available in the Business Investment statistical bulletin published on the same day as this release.
Including the alignment adjustment, the level of inventories increased by £3.6 billion in Q4 2013, following an increase of £4.3 billion in Q3 2013. Excluding the alignment adjustment, the level of inventories rose by £2.6 billion in Q4 2013, following an increase of £4.6 billion in Q3 2013.
The trade balance deficit decreased from £8.2 billion in Q3 2013 to £6.6 billion in Q4 2013 (see Figure 8) with exports increasing by 0.4% and imports falling by 0.9% between Q3 and Q4 2013. The trade position reflects exports minus imports. The deficit in the trade balance was £22.6 billion in 2013. Between 2012 and 2013 exports increased by 0.8% and imports by 0.4%.
Figure 9 shows the quarterly contribution of the expenditure components to GDP growth in chained volume measures, seasonally adjusted since Q1 2013. The chart shows a strong positive contribution from household final consumption expenditure (HHFCE) over the latest four quarters and positive contributions from general government final consumption expenditure (GGFCE) since Q2 2013. Investment recovered towards the end of 2013, with gross fixed capital formation (GFCF) making a positive contribution to annual growth over the latest four quarters. The trade balance and change in inventories are the most volatile components in terms of contribution to GDP with contributions changing considerably each quarter. The trade balance contributed 0.4% to GDP growth in Q4 2013, due to a 0.4% growth in exports and a 0.9% fall in imports.
Annex D (41.5 Kb Excel sheet) growth rates back to Q1 2012.
The gross domestic product implied deflator at market prices for Q4 2013 is 1.7% above the same quarter of 2012 (see Figure 10) and increased by 1.6% 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 (39.5 Kb Excel sheet) contains growth rates back to Q1 2012.
GDP at current market prices rose by 1.9% in Q4 2013 following a 1.7% increase in Q3 2013. In 2013 GDP at current market prices rose by 3.4%.
Compensation of employees – which includes both wages & salaries and pension contributions - increased by 0.5% in Q4 2013 following an increase of 0.4% in Q3 2013 (see Figure 11). In 2013 compensation of employees rose by 2.9%, 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 6.6% in Q4 2013 compared with the previous quarter. This follows an increase of 4.7% in Q3 2013 (see Figure 12). In the year 2013 gross operating surplus of corporations, including the alignment adjustment rose by 3.2%.
Taxes less subsidies on products and production rose by 1.8% in Q4 2013, following an increase of 3.3% in Q3 2013. In 2013 as a whole taxes less subsidies on products and production increased by 4.8%.
Figure 13 shows the contribution made by income components to current price GDP during 2013. All income components have seen growth when comparing Q4 2013 with Q4 2012, with compensation of employees growing by 3.9%; mixed income by 5.7% and gross operating surplus of corporations by 4.4%. Compensation of employees, the most significant contributor to positive growth in Q2 2013 due to deferred bonus payments, grew by 0.5% in Q4 2013, contributing 0.3 percentage points to GDP growth.
The latest two quarters have seen gross operating surplus of corporations making the most significant contribution to growth for income, both quarter on quarter and quarter on same quarter a year ago. An increase of 6.6% between Q3 and Q4 2013 contributed 1.3 percentage points to GDP.
In Q4 2013, GDP grew by 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, at 0.4%. The European Union grew by 1.0% compared to Q4 2012. United States of America (USA) saw quarterly growth rates of 0.8% in Q4 2013, while Japan maintained a growth rate of 0.3% in Q4 2013 (see Figure 14). Both the USA and Japan grew by 2.7% when compared to the same quarter of the previous year (see Figure 15).
|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 2013 (see Figure 17).
Detailed revisions for the three GDP approaches are shown in the annexes listed.
Output revisions are shown in Annex E (39.5 Kb Excel sheet) of this release.
Expendture revisions are shown in Annex F (41 Kb Excel sheet) of this release.
Income revisions are shown in Annex G (37 Kb Excel sheet) of this release.
This release includes data available up to 14 February 2014. Data are consistent with the current price trade in goods data within the UK Trade statistical bulletin published on 7 February 2014 and the Index of Production statistical bulletin also published on 7 February 2014.
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 (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 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.
Changes to publication dates
To bring the Quarterly National Accounts (QNA) into line with the standard national accounts publication timetable the March Q4 2013 QNA publication date is being moved from Wednesday 26 March to Friday 28 March 2014 while 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
The ONS has been exploring the introduction of Labour Force Survey (LFS) data in the calculation of Compensation of Employees (CoE) in preference to Workforce Jobs (WFJ). WFJ is currently multiplied by Average Weekly Earnings (AWE) at a broad industry level as the basis of the CoE calculation in years where HMRC tax data on employees are not available. Currently this calculation is used to extend the CoE data from Q1 2012 to Q4 2013.
The headline measure of employment has for some time come from the Labour Force Survey with Workforce Jobs used to supply breakdowns by industry. Given that the headline measure of employment is from the Labour Force Survey, ONS has begun investigating the feasibility of using a combination of LFS and Workforce Jobs in the quarterly estimates of GDP. If feasibility of the new method is successful, it will be implemented in the Quarterly National Accounts release of Q4 2013. Revisions to data would be applied from Q1 2012 to Q4 2013, in line with the National Accounts Revision Policy.
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 Blue Book and Pink Book 2014 (83.9 Kb Pdf) which is available on the ONS website.
Special events in 2012
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 5 March 2014.
Basic quality information for the GDP statistical bulletin
A Quality and Methodology Information (197.4 Kb Pdf) report 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 2 and 3 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 February 2009 (Q4 2008) to November 2013 (Q3 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|
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 '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.
New method for deriving rental data in the calculation of Household Final Consumption Expenditure
As announced on the 18 February, ONS are today introducing a new method for deriving rental data in the calculation of Household Final Consumption Expenditure in the National Accounts.
In summary, this means downwards revisions to the current price measure of Household Final Consumption Expenditure (HHFCE) on ‘Imputed Rental’ and ‘Actual Rental’ and will feed upwards to the ‘National’ measure of HHFCE, the highest aggregate published. With no changes to the chained volume measure (CVM) of HHFCE, growth in the household expenditure implied deflator will also be reduced.
Effect on GDP: Expenditure measure - In GDP Expenditure terms, as the change affects current price (“nominal”) HHFCE, the expenditure measure GDP in nominal terms will change in line but the equivalent CVM (“real”) measure will be unaffected. As a result the expenditure-based GDP deflator at market prices will be reduced.
This is used to deflate the current price income-based market price estimate to provide a chained volume measure (“real”) estimate of the total income component of GDP for balancing purposes.
Effect on Gross Operating Surplus of Households - In the national accounts, owner-occupiers are also deemed to be unincorporated businesses producing housing services. Once Owner-Occupied Financial Intermediation Services Indirectly Measured (FISIM) is removed, these housing services are recorded as Gross Operating Surplus of Households (GOSH).
Following the revision to HHFCE on imputed rental, GOSH will be reduced downwards by the same amount, in current price terms.
Effect on GDP - Income measure - The GDP Income measure in nominal terms will be reduced by the same amount as GOSH.
As discussed previously, the reduction in HHFCE also reduces the expenditure-based GDP deflator at market prices. This is used to deflate the current price income-based estimate to provide a real estimate of the total income component of GDP for balancing purposes. As the nominal income measure of GDP is being deflated by a small deflator, the real income measure will be revised upwards.
Implementation effects on GDP - Table 5 shows the flow of revisions following the change to HHFCE rental data. The deflator for 2013 for a whole is now improved in method following these changes. In line with National Accounts revisions policy, the rental data impact has been taken back to Q1 2013. The deflator for Q1 2013 has been impacted by these changes and this effect will be reviewed in the quarterly national accounts publication. As well as revising 2012 for the first time in the month 3 estimate of GDP for Q4 2013, data for 2013 are subject to change as new source data become available.
|HHFCE on Imputed and Actual Rental, current price||Reduced by £9.5 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||Reduced by £7.5 billion|
|GDP Income, current price||Reduced by £7.5 billion|
|GDP Income, CVM||Reduced by £6.7 billion|
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 levels of both expenditure and income were 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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