GDP quarterly national accounts, UK: January to March 2017

Revised quarterly estimate of gross domestic product (GDP) for the UK. Uses additional data to provide a more precise indication of economic growth than the first estimate.

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30 June 2017

23 December 2016

We informed users on 25 November 2016 that, following a quality review, a processing error had been identified in the compilation of the estimates for the rail transport industry (49.1-2), which affects the period Quarter 1 1997 to Quarter 2 2016. In line with the National Accounts revision policy, this error has been corrected in the Index of Services and Quarterly National Accounts published on 23 December 2016 for data from Quarter 1 2015. Data prior to 2015 will be corrected when next open for revision with Blue Book 2017 consistent releases due for publication on 29 September 2017.

30 September 2016

Following a quality review it has been identified that the methodology used to estimate elements of purchased software within gross fixed capital formation (GFCF) has led to some double counting from 1997 onwards. When this issue is amended in The Blue Book 2017 it will reduce the level of GFCF across the period by around 1.1% per year. The average impact on quarter-on-quarter GFCF growth is negative 0.02% and the average impact on quarter-on-quarter GDP growth is 0.00%.

Contact:
Email Robert Kent-Smith

Release date:
30 June 2017

Next release:
26 July 2017

1. Main points

  • Gross domestic product (GDP) and its components are little changed from the previous estimates published on 25 May 2017.
  • UK GDP in volume terms was estimated to have increased by 0.2% between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to Mar) 2017, unrevised from the previous estimate published on 25 May 2017; growth was driven by output from the business services and finance, and construction industries, partially offset by declines in some consumer-focused industries.
  • UK GDP growth in volume terms increased by 2.0% between Quarter 1 2016 and Quarter 1 2017, unrevised from the previous estimate.
  • GDP in current prices increased by 0.7% between Quarter 4 2016 and Quarter 1 2017, unrevised from the previous estimate.
  • GDP per head in volume terms was flat between Quarter 4 2016 and Quarter 1 2017.
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2. Things you need to know about this release

In line with National Accounts Revisions Policy, the only period open for revision in this release is Quarter 1 (Jan to Mar) 2017. Data in chained volume measures within this bulletin have had the effect of price changes removed (in other words, the data are deflated), with the exception of income data, which are only available in current prices.

Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP; the output approach, the expenditure approach and the income approach.

The quarterly national accounts are typically published around 90 days after the end of the quarter. At this stage the data content of this estimate from the output approach to GDP has risen to around 91% of the total required for the final output-based estimate. There is also around 90% data content available to produce estimates of GDP from the expenditure approach and around 70% data content from the income approach.

Further information on all three approaches to measuring GDP can be found in the short guide to national accounts.

Estimates for the most recent quarters are provisional and are subject to revision in light of updated source information. We provide an analysis of past revisions in the GDP and other statistical bulletins that present time series. Our revisions to economic statistics page brings together our work on revisions analysis, linking to articles and revisions policies. Revisions to data provide one indication of the reliability of main indicators. Revisions triangles are published on our website for UK GDP, UK gross value added, the GDP implied deflator and the expenditure and income components of GDP.

Improvements to earnings estimates of average weekly earnings

Average weekly earnings (AWE) is an important economic indicator designed to capture changes in the average earnings of employees in Great Britain. A review of the methodology used to calculate estimates for small businesses was carried out in 2016. As a result, planned improvements have been made in the UK labour market release and an article explaining these planned improvements to average weekly earnings was published on 29 March 2017. In national accounts, these improvements affect both the output measure of GDP, within the deflators used in the construction and services components, and the income measure of GDP, within the compensation of employees and other income components. The changes have been incorporated in the income approach to GDP for the period Quarter 1 (Jan to Mar) 2017. However, there was insufficient time to include these changes in the output approach to GDP and will be incorporated for Quarter 2 (Apr to June) 2017 only within the second estimate of GDP to be published on 24 August 2017. Further details can be found in the income approach section within section 3, “UK GDP growth is unrevised in Quarter 1 (Jan to Mar) 2017”.

Pre-release access to ONS statistics

On 15 June 2017, the National Statistician announced that pre-release access to Office for National Statistics (ONS) publications will stop with effect from 1 July 2017. This is therefore the last GDP-related release where ministers and other officials will receive access to information prior to release.

Corrections to be aware of

We previously informed you about corrections regarding the rail transport industry and gross fixed capital formation (GFCF). Further details can be found in section 6, “Are there any upcoming changes?”.

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3. UK GDP growth is unrevised in Quarter 1 (Jan to Mar) 2017

Headline GDP components and GDP per head

As seen in Figure 1, between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to Mar) 2017 UK gross domestic product (GDP) grew by 0.2%, which is the 17th consecutive quarterly increase and continues the UK’s period of steady growth since Quarter 1 2013. This is unrevised from the previous estimate published on 25 May 2017. UK GDP growth in volume terms increased by 2.0% between Quarter 1 2016 and Quarter 1 2017, unrevised from the previous estimate.

Output approach

The output approach to measuring GDP increased by 0.2% between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to Mar) 2017 and was unrevised from the second estimate of GDP published on 25 May 2017.

In Quarter 1 2017, all four sectors show positive growth; agriculture increased by 0.1%, total production increased by 0.1%, construction increased by 1.1% and total services increased by 0.1%.

Within production, three of the four components increased between Quarter 4 2016 and Quarter 1 2017, resulting in a small positive growth in total production. Within the production sub-industries, output from mining and quarrying (including oil and gas extraction) increased by 1.5%; manufacturing (the largest component of production) increased by 0.3% and water supply and sewerage increased by 1.0%. Electricity, gas, steam and air conditioning supply industries decreased by 4.2%. The decreases were largely caused by warmer-than-average temperatures during the months of February and March 2017, at 1.6 degrees Celsius and 1.8 degrees Celsius respectively above the long-term average (according to the Met Office).

The services industries increased by 0.1% in Quarter 1 2017, revised down 0.1 percentage points from the second estimate of GDP published on 25 May 2017, due to broad-based downward revisions in the transport, storage and communications, and business services and finance industries. This is the lowest quarter-on-quarter growth rate since Quarter 1 2015. The 0.1% growth was focused in the business services and finance, and government and other services industrial groups, but this was partially offset by declines in some consumer-focused industries, such as retail sales and accommodation.

The largest component within the output approach of GDP is the services industry with a weight of 78.8%.

Figure 2 shows that the services industries and construction have been the main contributor to GDP growth in Quarter 1 2017, each contributing 0.1 percentage points to the 0.2% UK GDP quarterly growth. Within services, the largest contributor to growth was business services and finance.

Further detail on the services industries’ lower-level components can be found in the Index of Services statistical bulletin published on 30 June 2017.

In Quarter 1 2017, construction increased by 1.1%, revised up by 0.9 percentage points from the previous estimate. This quarterly revision is due to survey returns from businesses replacing imputations causing an upwards revision in January and March, with infrastructure and private housing (new work) being the largest contributors to both the revision and the growth.

Expenditure approach

The expenditure approach to measuring GDP increased by 0.2% between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to Mar) 2017 and was unrevised from the second estimate of GDP published on 25 May 2017.

In Quarter 1 2017, household final consumption expenditure (HHFCE) or household spending grew by 0.4% in Quarter 1 2017; this has been revised up by 0.1 percentage points from the previous estimate but remains the lowest quarter-on-quarter growth since Quarter 4 2015.

In the latest quarter, household final consumption expenditure (the largest component within expenditure (60%)) has continued to make a positive contribution to GDP, although it is a smaller contribution than in more recent periods; 0.2 percentage points in Quarter 1 2017.

As part of our usual quality assurance processes for this release, we investigated the quarterly profile for fuels and lubricants, a component of personal transport equipment chained volume measure seasonally adjusted (CVM SA) within HHFCE. As a result, in the latest quarter we have reduced the fall in the CVM SA series by around £444 million, which also has an impact on the seasonally adjusted implied deflator. In this publication only the current quarter is open for revision so only Quarter 1 2017 was affected. Further details on this change and the implementation plan for earlier periods can be found in the Consumer trends release published on 30 June 2017.

In Quarter 1 2017, gross fixed capital formation (GFCF) increased by 1.0% compared with Quarter 4 2016 and has been revised down by 0.2 percentage points since the previous estimate, mainly due to actual data replacing forecast data within the dwellings component. Within GFCF, business investment grew by 0.6% in the latest quarter, due to positive contributions from other machinery and intellectual property products; partly offset by other buildings and structures. This is unrevised since the previous estimate. The level of business investment has remained relatively flat since Quarter 1 2015 and growth for quarter on the same quarter of previous year was 0.7% in Quarter 1 2017, revised down 0.1 percentage points from the previous estimate; the first positive growth since Quarter 4 2015.

Further details regarding the business investment data can be found within the Business investment release published on 30 June 2017.

In Quarter 1 2017, the total trade balance is a negative £13.7 billion revised from a negative £16.4 billion in the second estimate of GDP published on 25 May 2017. This reflects stronger exports and weaker imports in trade in goods with the main contributions to these revisions attributed to the fuels and unspecified goods (mainly non-monetary gold) categories.

Figure 3 shows the quarterly contribution of the expenditure components to the growth of GDP in chained volume measures. For Quarter 1 2017, the largest positive contribution to GDP came from gross capital formation, which contributed 0.6 percentage points. The only negative contribution to GDP came from net trade, which contributed a negative 0.8 percentage points. The contributions from net trade and gross capital formation are partially offsetting as data for non-monetary gold – a main driver behind the movements in net trade (trade in goods) and gross capital formation (acquisitions less disposals of valuables component) – feed into both components but offset each other, in effect making non-monetary gold GDP neutral. This article provides further details on the treatment of non-monetary gold within national accounts.

Within net trade, there has been a rise in total imports, which have contributed negatively to UK GDP, with a notable contribution from transport equipment, machinery and chemicals.

Income approach

The income approach to measuring GDP increased by 0.2% in chained volume measures (0.7% in current prices seasonally adjusted) between Quarter 4 (Oct to Dec) 2016 and Quarter 1 2017 and was unrevised from the second estimate of GDP.

All data quoted in the rest of this section are in current prices seasonally adjusted.

The latest data reflect a more balanced position across the three approaches to GDP compared with the previous data published in the second estimate of GDP, and reflect revisions to some income components, for example, gross operating surplus of corporations. The adjustments used to balance the three measures of GDP remain larger than usual this quarter but have been reduced since the second estimate of GDP. This is most clearly seen in the alignment and balancing adjustments in the income approach (see Table 3 for balancing adjustments). The alignment adjustment is outside of the usual tolerance of plus or minus £2,000 million at plus £2,633 million. We therefore advise that the growth rates of the individual income components are taken in the context of the adjustments that have been applied; this is particularly the case for gross operating surplus of corporations where large adjustments have been applied.

Within the income measure of GDP, three out of four components showed growth between Quarter 4 2016 and Quarter 1 2017. Gross operating surplus of corporations, the profits of companies, showed positive growth of 4.1%, revised down 1.2 percentage points from the second estimate of GDP. This in part reflects the reduction in the balancing adjustments applied to gross operating surplus since the second estimate.

Compensation of employees, which includes wages and salaries and employers' social contributions, showed positive growth of 0.6% seasonally adjusted in Quarter 1 2017 and is unrevised from the previous estimate published on 25 May 2017. Non-seasonally adjusted, growth was chiefly driven by strong positive growth in private sector wages and salaries, in turn driven by bonus payments typically made at Quarter 1 and a smaller fall in growth in private sector jobs than seen in Quarter 1 2016. This was partially offset by a small fall in public sector wages and salaries.

Within the compensation of employees and “other income” components, planned improvements to average weekly earnings data have been included for the open period, Quarter 1 2017 only, and have had no impact on growth rates.

Taxes on products and production less subsidies showed a decrease of 4.6%, revised up 2.8 percentage points since the previous data published in the second estimate of GDP on 25 May 2017, due to revised source data, particularly for Value Added Tax receipts.

Figure 4 shows the contribution made by income components to current price GDP. In Quarter 1 2017, the largest positive contribution to GDP came from gross operating surplus of corporations, which contributed 0.9 percentage points. As noted earlier, we advise some caution in the interpretation of quarter-on-quarter movements in the gross operating surplus component of the income measure of GDP for Quarter 1 2017.

GDP per head for Quarter 1 (Jan to Mar) 2017

In Quarter 1 (Jan to Mar) 2017, gross domestic product (GDP) per head was flat compared with Quarter 4 (Oct to Dec) 2016. GDP per head is now 1.8% above the GDP pre-downturn peak in Quarter 1 2008, having surpassed it in Quarter 4 2015 (Figure 5).

GDP per head is calculated by dividing GDP in chained volume measures by the latest population estimates and projections. The population estimates used in this release are those published on 23 June 2016 and the population projections used are those published on 29 October 2015. The latest population estimates published on 22 June 2017 will be included in the quarterly national accounts release on 29 September 2017.

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4. How is the UK economy performing compared with other European and non-European countries?

The estimates quoted in this international comparison section are the latest available estimates published by the Organisation for Economic Co-operation and Development OECD at the time of preparation of this statistical bulletin and may subsequently have been revised.

During Quarter 1 (Jan to Mar) 2017 the UK experienced the slowest growth of 0.2% among European countries and the G7, below that of the USA and Japan, which grew at 0.3%. In Quarter 1 2017, Canada experienced the highest growth at 0.9%.

All of the areas included within our international comparisons saw positive growth in Quarter 1 2017. Germany experienced growth of 0.6% whilst Italy and France experienced growth of 0.4% and 0.5% respectively (Table 2). The European Union (EU28) grew by 0.6% (Figure 7), marking 16 consecutive quarters of positive growth, and in the same period, the group of Euro Area countries (EA19) grew by 0.6% also.

All G7 countries are currently above pre-economic downturn peaks except for Italy, the GDP of which remains 6.8% below the pre-downturn peak (Quarter 1 2008). Canada shows signs of the strongest recovery at 15.5%. The UK has the third-strongest rate at 8.7%, while the USA has the second-strongest rate at 13.2%. Germany and France have rates of 8.5% and 5.1% respectively.

The data used for these international comparisons are gathered from the Organisation for Economic Co-operation and Development’s website excluding the data from the UK, which is compiled within the Office for National Statistics.

Figure 7 shows GDP for the USA, Germany, France, Italy, UK, Japan and Canada all indexed to Quarter 1 2008 (the pre-downturn peak in the UK) to allow comparison of each since that period.

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6. Are there any upcoming changes?

Methodological changes on gross domestic product

In the Impact of methodological changes to chain-linking on gross domestic product article we informed you that in Blue Book 2017, the reference year and last base year will move forward 2 years to 2015 and, pending the outcome of further analysis, we would investigate the feasibility of further moving the last base year on when the data for the most recent year are formed.

We have now completed this feasibility analysis and have concluded that we will not move the last base year beyond 2015 in Blue Book 2017. Therefore, the reference year and last base year for Blue Book 2017 and the Blue Book-consistent Quarterly National Accounts due for publication on 29 September 2017 will be 2015. Further methodological work will continue to develop an approach to further moving on the last base year.

Corrections to be aware of

We informed you on 25 November 2016 that, following a quality review, a processing error had been identified in the compilation of the estimates for the rail transport industry (49.1-2), which affects the period Quarter 1 (Jan to Mar) 1997 to Quarter 2 (Apr to June) 2016. In line with the National Accounts Revision Policy, this error has been corrected in the Index of Services and Quarterly National Accounts published on 23 December 2016 for data from Quarter 1 2015. Data prior to 2015 will be corrected when next open for revision with Blue Book 2017-consistent releases due for publication on 29 September 2017. The average impact over this period on quarter-on-quarter Index of Services and GDP growth is 0.00%.

Following a quality review it has been identified that the methodology used to estimate elements of purchased software within gross fixed capital formation (GFCF) has led to some double-counting from 1997 onwards. When this issue is resolved in Blue Book 2017 it will reduce the level of GFCF across the period by around 1.1% per year. The average impact on quarter-on-quarter GFCF growth is negative 0.02% and the average impact on quarter-on-quarter GDP growth is 0.00%.

National Accounts articles

Impact of Blue Book 2017 changes on current price and chained volume measure gross domestic product estimates, 1997 to 2015

This article, to be published on 6 July 2017, details estimates of the total impact of all the improvements to current price and chained volume measure (CVM or “real”) gross domestic product (GDP) up to 2015, which will be published in the Blue Book 2017-consistent Quarterly National Accounts (QNA) publication on 29 September 2017.

Changes to the presentation of the tables within Blue Book 2017 and Pink Book 2017

This article, to be published on 6 July 2017, details changes to the table presentation along with a detailed change matrix for both the Blue Book 2017 and the UK Economic Accounts (UKEA). The Pink Book will include just the change matrix as the table presentation has already been published as part of the Detailed assessment of changes to balance of payments annual estimates, 1997 to 2012 article published on 5 June 2017.

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7. Quality and methodology

The Gross domestic product (GDP) Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data
  • uses and users of the data
  • how the output was created
  • the quality of the output including the accuracy of the data

The national accounts are drawn together using data from many different sources. This ensures that the national accounts are comprehensive and provide different perspectives on the economy, for example, sales by retailers and purchases by households.

Important quality issues

There are common pitfalls in interpreting data series and these include:

  • 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”.

Many different approaches can be used to summarise revisions; the “Validation and quality assurance” section in the Quality and Methodology Information report analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations. In addition to this analysis, section 11 of the Revisions to gross domestic product in Blue Book 2016 article updates the metrics used to test revisions performance to answer the question “Is GDP biased?”

Reaching the GDP balance

The different data content of the three approaches – the output approach, the expenditure approach and the income approach – dictates the approach taken in balancing quarterly data. In the UK, there are more data available on output than in either of the other two approaches. However, to obtain the best estimate of GDP (the published figure), the estimates from all three approaches are balanced to produce an average, except in the latest quarter where the output data takes the lead due to its larger data content.

Information on the methods we use for Balancing the output, income and expenditure approaches to measuring GDP is available.

Alignment adjustments, found in Table M of the Quarterly National Accounts data tables in this release, have a target limit of plus or minus £2,000 million on any quarter. However, in periods where the data sources are particularly difficult to balance, slightly larger alignment adjustments are sometimes needed and this has been the case for the income approach in Quarter 1 (Jan to Mar) 2017. To achieve this balance through alignment, balancing adjustments are applied to the expenditure and income components of GDP as required. They are applied to those individual components where data content is particularly weak in a given quarter due to a high level of forecast content. Balancing adjustments are larger than usual in Quarter 1 2017.

The size and direction of the quarterly alignment adjustments in Quarter 1 2017 indicate that in this quarter the level of expenditure and income are lower than the level of output.

Table 3 shows the balancing adjustments applied to the GDP estimates in this publication.

Further information

We are committed to ensuring all information provided is kept strictly confidential and will only be used for statistical purposes. Further details regarding confidentiality can be found in the respondent charters for businesses and households, on our website.

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