GDP quarterly national accounts, UK: January to March 2016

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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Corrections

25 November 2016 09:40

A processing error has been identified in the non-monetary gold estimates within the acquisition less disposals of valuables data series from Quarter 1 2015 onwards. The data will be amended back to Quarter 1 2015 for the Quarterly National Accounts (QNA) Quarter 3 2016 release, due to be published on the 23rd December 2016. The average impact on quarter-on-quarter GDP growth over the affected period is -0.01 percentage points.

25 November 2016 09:40

Following a quality review, a processing error has 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 will be corrected in the Index of Services and Quarterly National Accounts due for publication on 23rd December 2016 for data from Quarter 1 2015 and in the Blue Book 2017 consistent releases for data prior to this period. The average impact over this period on quarter-on-quarter Index of Services and GDP growth is 0.00%. This processing error does not impact quarter on quarter growth into Quarter 3 2016.

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28 July 2016 08:23

A minor error was identified in table K1, in the Quarterly National Accounts Q1 2016 released at 9:30am on 30th June 2016. A processing error led to the publication of incorrect data for 2014 for series CAGD and CAED. These series have now been corrected, along with the associated growth rates (KH5C, KH5D, KH5E, KH5F, KH5G and KH5H) derived from these series. We apologise for any inconvenience.

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Notices

30 September 2016

This is an accredited national statistic.

Contact:
Email Matthew Hughes

Release date:
30 June 2016

Next release:
27 July 2016

1. Main points

UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.4% in Quarter 1 (Jan to Mar) 2016, unrevised from the second estimate of GDP published on 26 May 2016. This is the 13th consecutive quarter of positive growth since Quarter 1 2013.

Since Quarter 1 2015, revisions to GDP quarterly volume growths are small - with a 0.2 percentage point downward revision to Quarter 1 2015 and Quarter 2 (Apr to June) 2015 partially being offset by a 0.1 percentage point upward revision to Quarter 4 (Oct to Dec) 2015.

Between 2014 and 2015, GDP in volume terms increased by 2.2%, revised down 0.1 percentage points from the previous estimate. Between Quarter 1 2015 and Quarter 1 2016, GDP in volume terms increased by 2.0%, unrevised from the previously published estimate.

GDP decreased by 6.3% from the peak in Quarter 1 2008 to the trough in Quarter 2 2009, a little deeper than previously estimated. Having regained its pre-downturn peak in Quarter 3 2013 (one quarter later than previously published), GDP in Quarter 1 2016 is currently 7.0% above its pre-downturn peak.

GDP per head in volume terms was estimated to have increased by 0.3% between Quarter 4 2015 and Quarter 1 2016. Between 2014 and 2015, GDP per head increased by 1.4%.

GDP in current prices increased by 1.0% between Quarter 4 2015 and Quarter 1 2016, revised up 0.3 percentage points from the previously published estimate.

The households and non-profit institutions serving households saving ratio was estimated to be 5.9% in Quarter 1 2016 compared with 5.8% in Quarter 4 2015. In 2015, the saving ratio was estimated to be 6.1%.

Real households disposable income increased by 2.0% between Quarter 4 2015 and Quarter 1 2016. In 2015 real households disposable income increased by 3.5%.

Estimates in this bulletin are consistent with our annual national accounts Blue Book 2016 publication, to be published on 29 July 2016. The last base year and reference year for the chained volume estimates have both moved from 2012 to 2013.

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2. Understanding GDP

Gross domestic product (GDP) growth is the main indicator of economic performance. There are 3 approaches used to measure GDP.

Gross value added (GVA) is the sum of goods and services produced within the economy less the value of goods and services used up in the production process (intermediate consumption). The output approach measures GVA at a detailed industry level before aggregating to produce an estimate for the whole economy. GDP (as measured by the output approach) can then be calculated by adding taxes and subtracting subsidies (both only available at whole economy level) to this estimate of total GVA (more information on creating the preliminary estimate of GDP is available on our methods and sources page).

The income approach measures income generated by production in the form of gross operating surplus (profits), compensation of employees (income from employment) and mixed income (self-employment income) for the whole economy.

The expenditure approach is the sum of all final expenditures within the economy, that is, all expenditure on goods and services that are not used up or transformed in the production process, that is, final consumption (not intermediate) for the whole economy.

The third estimate of GDP is based on revised output data, together with updated data from expenditure and income components. In the quarterly national accounts, the output GVA and GDP estimates are balanced with the equivalent income and expenditure approaches to produce headline estimates of GVA and GDP. Further information on all 3 approaches to measuring GDP can be found in the short guide to national accounts.

All data in this bulletin are seasonally adjusted estimates and 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. For further information regarding non-seasonally adjusted data, please refer to the UK economic accounts. It can be downloaded directly from the UKEA dataset and on the UKEA main aggregates reference table.

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.

In line with national accounts revisions policy, the earliest period open for revision in this release is the start date of each series.

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3. About the Quarterly National Accounts

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 measure of gross domestic product (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.

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4. The quality of the GDP estimate

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. One source of information is from business surveys which use information provided directly from UK businesses. These data are subject to many layers of vigorous quality assurance by highly trained personnel, from clarity and confirmation of individual unit data direct from the business contact to scrutiny of data at the macro level. Other sources of data include other government departments and administrative data, including Value Added Tax (VAT) data from HM Revenue and Customs (HMRC) which are subject to quality checks and challenge from ONS. By comparing and contrasting these different sources, the national accounts produce a single picture of the economy which is consistent, coherent and fully integrated.

The production and publication of each gross domestic product (GDP) release is managed by a highly skilled team with a strong emphasis on statistical, analytical and economic debate throughout the production process to publish the headline GDP estimate and components. Although a limited audience have access to GDP data ahead of publication, those involved in the process are selected to ensure each GDP balance achieves a rigorous statistical and economic challenge. A “balancing meeting” is held during each production round where presentations assess GDP and its components against a swathe of external indicators and a focus on GDP headline components. This is attended by senior managers within ONS who challenge the data to ensure consistency and plausibility of the GDP balance. We recognise the importance of transparency and have recently introduced an additional section in our background notes where the balancing adjustments applied - size and the components targeted - are now published.

Accompanying each quarterly and annual production cycle, external quality assurers with particular areas of expertise are invited to challenge and report on the statistical and economic coherence of the headline national account and component dataset. Current assessors include HM Treasury, Bank of England, National Institute of Economic and Social Research, HMRC and Tax Administration Research Centre. Drawing on their personal experience, expertise and subject knowledge, the external quality assurors work in a personal capacity to challenge the synergy of the dataset from a full range of views - from producers, data compilers and from users of the statistics - before final sign-off.

Unlike many short-term indicators published by ONS, there is no simple way of measuring the accuracy of GDP. All estimates, by definition, are subject to statistical uncertainty and for many well-established statistics we measure and publish the sampling error and non-sampling error associated with the estimate, using this as an indicator of accuracy. Since sampling is typically done to determine the characteristics of a whole population, the difference between the sample and population values is considered a sampling error. Non-sampling errors are a result of deviations from the true value that are not a function of the sample chosen, including various systematic errors and any other errors that are not due to sampling. The estimate of GDP, however, is currently constructed from a wide variety of data sources, some of which are not based on random samples or do not have published sampling and non-sampling errors available and as such it is very difficult to measure both error aspects and their impact on GDP. While development work continues in this area, like all other G7 national statistical institutes, we don't publish a measure of the sampling error/non-sampling error associated with GDP.

One dimension of measuring accuracy is reliability, which is measured using evidence from analyses of revisions to assess the closeness of early estimates to subsequently estimated values. Many users try to minimise the impact of uncertainty through using the historical experience of revisions as a basis for estimating how confident they are in early releases and predicting how far and in what direction the early release might be revised. Revisions are an inevitable consequence of the trade-off between timeliness and accuracy. The estimate is subject to revisions as more data become available, but between the preliminary and third estimates of GDP, revisions are typically small (around 0.1 to 0.2 percentage points), with the frequency of upward and downward revisions broadly equal. Many different approaches can be used to summarise revisions; the Validation and Quality Assurance section in the Quality and Methodology Information paper analyse the mean average revision and the mean absolute revision for GDP estimates over data publication iterations. In addition to this analysis, Section 14 of the Revisions to GDP and components in Blue Books 2014 and 2015 article updates the metrics used to test revisions performance in order to answer the question “Is GDP biased?”

Headline GDP components and GDP per head

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5. Historical context

Figure 1 shows the annual levels of gross domestic product (GDP) over the last 67 years. It shows the steady economic growth in the UK from the mid 1990s through to 2008 when the UK suffered an economic downturn.

Figure 2 shows growths for the chained volume measure of GDP between 1949 and 2015.

This can be compared with previous economic downturns in the early 1980s and early 1990s, which saw lower levels of impact on GDP. In the early 1990s downturn, GDP decreased 2.0% from the peak in Quarter 2 (Apr to June) 1990 to the trough in Quarter 3 (July to Sept) 1991. In the early 1980s downturn, GDP decreased by 5.4% from the peak in Quarter 2 1979 to the trough in Quarter 1 (Jan to Mar) 1981.

From Quarter 3 2009, growth continued to be erratic, with several quarters between 2010 and 2012 recording broadly flat or declining GDP growth. This 2-year period coincided with special events (for example severe winter weather in Quarter 4 (Oct to Dec) 2010 and the Diamond Jubilee in Quarter 2 2012) that are likely to have affected growth both adversely and positively. Since 2013, GDP has grown steadily, with the economy exceeding pre-downturn peak levels in Quarter 3 2013.

GDP growth in Quarter 1 2016 has slowed marginally to 0.4% which is just below the average quarterly growth of 0.6% since 2013 when GDP growth became more established. Between Quarter 1 2015 and Quarter 1 2016 GDP has grown by 2.0%. GDP is currently 7.0% above its pre-downturn peak and has been growing for 13 consecutive quarters.

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6. GDP analysed by output categories, chained volume measures, tables B1 and B2

Table AA contains output component growth rates and contributions to growth rates back to Quarter 1 (Jan to Mar) 2014.

Only 1 of the 4 main output industrial groupings within gross domestic product (GDP) showed an increase in Quarter 1 (Jan to Mar) 2016 compared with Quarter 4 (Oct to Dec) 2015, with services showing an increase, agriculture remaining flat and production and construction falling in this period. Within production, 2 of the 4 components increased and 2 components decreased, which resulted in overall negative growth in total production.

Production output decreased by 0.2% in Quarter 1 2016 compared with Quarter 4 2015, revised up 0.2 percentage point from the previously published estimate. Within the production sub-industries, output from mining and quarrying, including oil and gas extraction, decreased by 2.2%; manufacturing (the largest component of production) decreased by 0.2% (Figure 3), while electricity, gas, steam and air conditioning supply industries increased by 0.7%, and water supply and sewerage increased by 2.4%.

When comparing Quarter 1 2016 with Quarter 1 2015, production output increased by 0.3%, revised up 0.2 percentage points from the previously published estimate. Mining and quarrying, including oil and gas extraction, increased by 6.0%, and water supply and sewerage increased by 7.1%. Manufacturing fell by 1.0% between these periods while the electricity, gas, steam and air conditioning supply industries decreased by 2.5%.

Construction output decreased by 0.3% in Quarter 1 2016, revised up 0.7 percentage points from the previously published estimate. Construction output increased by 0.2% between Quarter 1 2015 and Quarter 1 2016, revised up 2.0 percentage points from the previously published estimate.

The service industries increased by 0.6% in Quarter 1 2016 (Figure 4), unrevised from the previous estimate, marking the 13th consecutive quarter of positive growth. This follows a 0.9% increase in Quarter 4 2015.

Output of the distribution, hotels and catering industries increased by 1.4 per cent in Quarter 1 2016, this follows an increase of 1.5 per cent in Quarter 4 2015.

Output of the transport, storage and communications industries was flat in Quarter 1 2016, this follows an increase of 1.2 per cent in Quarter 4 2015.

Business services and finance industries increased by 0.7 per cent in Quarter 1 2016, this follows an increase of 0.7 per cent in Quarter 4 2015.

Output of the government and other services industries increased by 0.3 per cent in Quarter 1 2016, this follows an increase of 0.6 per cent in Quarter 4 2015.

Further detail on the service industries’ lower level components can be found in the Index of Services statistical bulletin published on 30 June 2016.

Gross value added (GVA) excluding oil and gas extraction increased by 0.5% in Quarter 1 2016 following a 0.7% increase in Quarter 4 2015.

Figure 5 shows the path of GDP and its headline industries (this excludes agriculture, and includes manufacturing which is a sub-component of production) relative to their level of output achieved in Quarter 1 2008.

Industries have shown differing trends following the recent economic downturn. The construction, manufacturing and production industries were more acutely affected by the deterioration in economic conditions, with the respective outputs falling by 17.1%, 12.2% and 10.5% respectively between Quarter 1 2008 and Quarter 2 (Apr to June) 2009. In contrast, output in the service industries fell by 4.6% from its peak to trough.

Production activity began to grow again in 2010, and the manufacturing and the construction industries showed particular strength – neither industry sustained this growth. Production output fell between 2011 and 2013, falling below levels seen at the height of the downturn in 2009. Construction output also fell sharply in 2012, but started growing again in 2013. Construction output in 2015 as a whole was 4.2% higher than 2014, but much lower than the rate of growth between 2013 and 2014 (8.0%). In Quarter 1 2016 construction output contracted by 0.3% on a quarter on quarter basis, but grew by 0.2% on a quarter a year ago basis. Although there has been growth across all major components of GDP since 2013, the service industries remain the largest and steadiest contributor to overall economic growth, and are the only headline industries in which output has exceeded pre-downturn levels.

Figure 6 shows the average compound quarterly growth rate experienced over the 5 years prior to the economic downturn in 2008 to 2009, the average growth rate experienced between Quarter 3 2009 and Quarter 2 (Apr to June) 2014 (5 years following the downturn), and the current quarterly growth rate observed in the most recent period (Quarter 1 2016). Compound average growth is the rate at which a series would have increased or decreased if it had grown or fallen at a steady rate over a number of periods. This allows the composition of growth in the recent economic recovery to be compared to the long run average.

The UK experienced slower average compound GDP growth in the 5 years following the economic downturn compared with the 5 years prior: this is also true for the service industries. Figure 5 shows that in Quarter 1 2016, the service industries were the only sector which outperformed its post-downturn average rate of growth. While the service industries grew in Quarter 1 2016 the production, manufacturing and construction sectors experienced contractions of 0.2%, 0.2% and 0.3% respectively.

It should be noted that the third column, which shows the current quarterly growth rate, is based on only 1 data point. Consequently users should use caution when making direct comparisons with the long run averages.

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7. GDP analysed by expenditure categories, chained volume measures, table C2

Table AB contains expenditure component growth rates and contribution to growth rates back to Quarter 1 (Jan to Mar) 2014.

Total domestic expenditure (the sum of all expenditure by UK residents on goods and services that are not used up or transformed in a productive process) increased by 0.3% in Quarter 1 2016. Annually, between 2014 and 2015 total domestic expenditure increased by 2.5%.

The new method for imputed rental introduced in Blue Book 2016 had a substantial impact on calendar year household consumption growth; however this is shown to not significantly alter the broad quarterly path of Household Final Consumption Expenditure (HHFCE). Further detail is provided in the article Impact of methods changes to the national accounts and sector & financial accounts, Q1 1997 to Q1 2016, published on 30 June 2016.

HHFCE increased by 0.7% in Quarter 1 2016, and has increased for 5 consecutive quarters (Figure 7). When compared with the same quarter a year ago, HHFCE has been rising each quarter since Quarter 4 (Oct to Dec) 2011, and was 2.8% higher in Quarter 1 2016 than in the same period a year ago. Between 2014 and 2015, HHFCE increased by 2.6%.

Figure 8 shows the contribution of different categories of goods and services to quarter on same quarter of previous year growth in UK HHFCE. Growth has remained positive since Quarter 3 (July to Sept) 2011 and is shown to have been broad-based across both goods and services. While durable and semi durable goods and services were the predominant drivers of growth in recent periods, the contribution of non durable goods has been positive in the last 5 quarters. In Quarter 1 2016, consumption of non-durables contributed 0.3 percentage points. Non-durable goods include items which can only be consumed or used once; good examples of these are food products.

Government final consumption expenditure increased by 0.5% in Quarter 1 2016, following a 0.2% increase in Quarter 4 2015. Between Quarter 1 2015 and Quarter 1 2016, government final consumption expenditure increased by 1.9%. Between 2014 and 2015, government final consumption expenditure increased by 1.4%.

Non-profit institutions serving households’ (NPISH) final consumption expenditure increased by 1.7% in Quarter 1 2016, following a 0.5% increase in Quarter 4 2015. Between Quarter 1 2015 and Quarter 1 2016, NPISH final consumption expenditure increased by 2.2%. Annually, NPISH final consumption expenditure increased by 1.5% between 2014 and 2015.

Blue Book 2016 contained only a small number of methodological changes to the components of Gross Fixed Capital Formation (GFCF) and are mainly attributed to revised dwelling, agriculture and own account construction data.

In Quarter 1 2016, GFCF was estimated to have decreased by 0.1% (Figure 9). Between Quarter 1 2015 and Quarter 1 2016, GFCF increased by 0.7%. GFCF increased by 3.3% between 2014 and 2015. More detail on GFCF, including a breakdown of the GFCF components, can be found in the Business investment statistical bulletin published on 30 June 2016.

Business investment was estimated to have decreased by 0.6% in Quarter 1 2016 and decreased by 0.8% between Quarter 1 2015 and Quarter 1 2016. Annually, business investment increased by 5.0% between 2014 and 2015.

Including the alignment adjustment, the level of inventories increased by £1.2 billion in Quarter 1 2016, following an increase of £2.9 billion in Quarter 4 2015. Excluding the alignment adjustment, the level of inventories increased by £2.9 billion in Quarter 1 2016, following an increase of £1.5 billion in Quarter 4 2015. More information on the alignment adjustment can be found in the Balancing GDP section within the background notes of this release.

The trade balance deficit widened from £13.4 billion in Quarter 4 2015 to £14.1 billion in Quarter 1 2016 (Figure 10). The trade position reflects exports minus imports. Following a 3.2% increase in Quarter 4 2015, exports decreased by 0.4% in the latest quarter, while imports increased by 0.1% in Quarter 1 2016 following a 2.5% increase in Quarter 4 2015.

Exports of goods increased by 1.9% in Quarter 1 2016, due mainly to an increase in exports of oil, chemicals and cars. Exports of services decreased by 3.4% in Quarter 1 2016, due to a fall in other business services. In Quarter 1 2016, imports of goods increased by 0.6%, due to an increase in imports of machinery. Imports of services decreased by 1.4% in Quarter 1 2016, due to a fall in import of travel services.

Between 2014 and 2015, exports increased by 4.8%, with increases in exports of services and exports of goods, while imports increased by 5.8%; reflecting an increase in both imports of goods and services.

The Blue Book 2016 changes to exports and imports result in revisions to the contribution of net trade to GDP. Table AB shows the contribution of net trade and suggests that net trade continues to switch between periods of both supporting gross domestic product (GDP) growth and acting as a drag on GDP growth.

Figure 11 shows a breakdown of the trade components and their contribution to GDP growth from Quarter 1 2008 to Quarter 1 2016. In the most recent quarter the trade balance made a positive contribution of 0.1 percentage points to GDP growth. The series indicates that in the previous 4 quarters the UK trade balance has made a negative contribution to GDP growth. When comparing Quarter 1 2016 with Quarter 1 2015, export of goods increased by 3.2% and contributed 0.6 percentage points to GDP growth. This outweighed the 1.6% growth in the import of goods, which contributed -0.4 percentage points to GDP growth.

Figure 12 shows the quarterly contribution of the expenditure components to the growth of GDP in chained volume measures. For Quarter 1 2016, the largest positive contribution to GDP came from household final consumption expenditure, which contributed 0.4 percentage points. General government final consumption expenditure contributed 0.1 percentage points. The negative contributions to GDP came from net trade, which contributed a negative 0.2 percentage points and gross capital formation, which contributed a negative 0.2 percentage points.

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8. GDP implied deflator

Table AD contains implied deflator component growth rates back to Quarter 1 (Jan to Mar) 2014.

The gross domestic product (GDP) implied deflator at market prices for Quarter 1 (Jan to Mar) 2016 is 0.1% above the same quarter of 2015 (Figure 13). The GDP implied deflator is calculated by dividing current price (nominal) GDP by chained volume (real) GDP and multiplying by 100 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.

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9. GDP analysed by income categories at current prices, table D

Table AC contains income component growth rates back to Quarter 1 (Jan to Mar) 2014.

Gross domestic product (GDP) at current market prices increased by 1.0% in Quarter 1 2016, following a 0.5% increase in Quarter 4 (Oct to Dec) 2015. GDP at current market prices increased by 2.1% when compared with Quarter 1 2015. In 2015, GDP at current market prices increased by 2.6%.

Within this bulletin the calculation of wages and salaries estimates, which forms part of Compensation of Employees, has been revised in years following supply and use balancing (“the quarterly tail”). This change makes better use of existing data sources and realigns wages and salaries estimates with the European System of Accounts 2010 definition of the concept which requires measurement of both ‘cash’ and ‘in kind’ employee income. Previously non-seasonally adjusted wages and salaries were calculated as total economy employees (sourced from the Labour Force Survey) multiplied by total economy average earnings including bonuses (sourced from Average Weekly Earnings). The new method calculates the public and private sectors separately by making use of data specific to both sectors. More detail can be found in the second part of the ‘Quarterly round changes’ section in the Background notes.

Compensation of employees – which includes both wages and salaries, and employers’ social contributions, increased by 0.9% in Quarter 1 2016, following an increase of 0.4% in Quarter 4 2015 (Figure 14). Between Quarter 1 2015 and Quarter 1 2016, compensation of employees increased by 3.5%. In 2015, compensation of employees increased by 3.3%.

The gross operating surplus of corporations (GOS) (effectively the profits of companies operating within the UK), including the alignment adjustment, increased by 3.7% in Quarter 1 2016 compared with the previous quarter; Quarter 4 2015 was flat (Figure 15). Between 2014 and 2015, the GOS of corporations increased by 0.2%. More information on the alignment adjustment can be found in the Balancing GDP section within the background notes of this release.

Taxes on products and production less subsidies decreased by 1.2% in Quarter 1 2016, following an increase of 2.6% in Quarter 4 2015. Between 2014 and 2015, taxes on products and production less subsidies increased by 2.4%.

Figure 16 shows the contribution made by income components to current price GDP. In Quarter 1 2016, there were positive contributions to GDP from gross operating surplus of corporations which contributed 0.7 percentage points, compensation of employees which contributed 0.4 percentage points and other income which contributed 0.2 percentage points. The only negative contribution to GDP came from taxes on products and production less subsidies which contributed a negative 0.1 percentage points.

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10. GDP per head, table P

In Quarter 1 (Jan to Mar) 2016 gross domestic product (GDP) per head increased by 0.3% compared with Quarter 4 (Oct to Dec) 2015, revised up 0.1 percentage points from the previously published estimate. GDP per head is now 0.8% above its pre-downturn peak in Quarter 4 2007 (1 quarter earlier than previously published), having surpassed it in Quarter 3 (July to Sept) 2015 (1 quarter later than previously published).

In comparison, GDP exceeded the level of its pre-downturn peak in Quarter 3 2013 (unrevised), and is now 7.0% above its pre-downturn peak (revised from 7.2%; Figure 17).

Between Quarter 1 2015 and Quarter 1 2016, GDP per head increased by 1.3%. Between 2014 and 2015 GDP per head increased by 1.4%, revised from 1.5%.

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.

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11. Sector Accounts, tables I, J1, J2, J3, K1 and K2

Summary

In Quarter 1 (Jan to Mar) 2016, the central government, local government, financial corporations and households and non-profit institutions serving households sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders (Figure 18).

Compared to the previous quarter, public corporations and private non-financial corporations switched from net borrowers to net lenders. All other sectors remain unchanged.

Table I has further detail.

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12. The households and non-profit institutions serving households (NPISH) sector (tables J1, J2 and J3)

Saving ratio:

The saving ratio for Quarter 1 (Jan to Mar) 2016 was 5.9%, compared with 5.8% in the previous quarter (Figure 19).

This rise in the latest quarter reflects rises in net property income and compensation of employees partially offset by increased taxes on income and wealth and final consumption expenditure.

What is the saving ratio?

The saving ratio estimates the amount of money households and NPISH have available to save (known as gross saving) as a percentage of their total disposable income (known as total available resources). Both can be found in table J3 of this release.

Gross saving estimates the difference between households and NPISH 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 households disposable income (RHDI), are estimated in current prices (CP). These are sometimes known as nominal prices, meaning that they include the effects of price changes.

The saving ratio is published in both non-seasonally adjusted (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. This is because gross saving is a small difference between 2 numbers. It is therefore often revised at successive publications when new or updated data are included.

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13. Real households and NPISH disposable income:

The level of real households and non-profit institutions serving households (NPISH) disposable income increased by 2.0% in Quarter 1 (Jan to Mar) 2016, following a decrease of 0.5% in the previous quarter (Figure 21).

This rise in the latest quarter reflects a rise in net social benefits other than transfers in kind and net property income partially offset by increased taxes on income and wealth.

Figure 22 shows the main components contributing to the quarterly movement of households and NPISH gross disposable income.

What is real households and NPISH disposable income?

There are 2 measures of households and NPISH 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 households and NPISH disposable income (GDI) is the estimate of the total amount of money from income that households and NPISH 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 GDI to remove the effects of inflation, we are able to estimate another useful measure of disposable income called real disposable income. This is a measure of real purchasing power of households and NPISH incomes, in terms of the physical quantity of goods and services they would be able to purchase. We use the households and NPISH expenditure deflator (which can be found in table J2 of this release) to remove the effects of price inflation.

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14. Private non-financial corporations sector (tables K1 and K2)

Net lending of private non-financial corporations’ was £1.1 billion in Quarter 1 (Jan to Mar) 2016, following net borrowing of £58 million in the previous quarter. This increase to net lending in the latest quarter was due to a rise in gross operating surplus and decreased gross capital formation partially offset by a fall in net property income.

For a more detailed coverage of the sector accounts a new bulletin called Quarterly Sector Accounts is now being released alongside this bulletin covering all institutional sectors.

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15. International comparisons for Quarter 1 (Jan to Mar) 2016

The estimates quoted in this international comparison section are the latest available estimates published by the respective bodies (referenced) at the time of preparation of this statistical bulletin and may subsequently have been revised.

All areas included within our international comparison saw positive growth when comparing Quarter 1 (Jan to Mar) 2016 with Quarter 4 (Oct to Dec) 2015 (Figure 22). The European Union (EU28) grew by 0.5%, marking 12 consecutive quarters of positive growth (Table 2). In the same period, the group of Euro Area countries (EA19) grew by 0.6%, revised from 0.5% published in the UK’s Second Estimate. When comparing Quarter 1 2016 with Quarter 1 2015, EA19 grew by 1.7% and the EU28 expanded by 1.8% (Figure 23).

Germany and France saw their gross domestic product (GDP) increase by 0.7% and 0.6%, respectively, between Quarter 4 2015 and Quarter 1 2016; this compares to slower growth rates of 0.3% and 0.4%, respectively, in the previous quarter.

In Quarter 1 2016, the USA’s economy increased by 0.2% and GDP for Japan increased by 0.5%, with the latter following a decrease of 0.4% in the previous quarter. Compared to the same quarter last year, the USA’s GDP increased by 2.0, while Japan’s economy showed flat growth.

The combined GDP for the Group of Seven (G7) countries increased by 0.4% in Quarter 1 2016, revised from 0.3% published in the UK’s Second Estimate. When comparing Quarter 1 2015 with Quarter 1 2016, G7 GDP increased by 1.6% and is now 6.7% above its pre-downturn peak in Quarter 1 2008. Italy is the only G7 country with its GDP still below Quarter 1 2008, at 8.5% below its pre-downturn peak.

Information on the estimates for the USA can be found on the Bureau of Economic Analysis website; information on the estimates for Japan can be found on the Japanese Cabinet Office website. More detailed information for the G7 and the EU countries can be found on the Organisation for Economic Co-operation and Development’s website and Eurostat website, respectively.

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16. Quarterly revisions

GDP and components, previously published on 26 May 2016

Figure 26 shows quarterly revisions between latest and previously published estimates of gross domestic product (GDP). All time periods are open for revision in this release.

Detailed revisions for the 3 GDP approaches

  • output revisions are shown in Table AE
  • expenditure revisions are shown in Table AF
  • income revisions are shown in Table AG

Sector accounts revisions, previously published 31 March 2016

  • sector accounts revisions are shown in Table AH
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17 .Background notes

What do you think?

  1. We would welcome your feedback on this publication. If you would like to get in touch please contact us via email: gdp@ons.gov.uk

    Release policy

  2. This release includes data available up to 21 June 2016 and is consistent with our annual Blue Book publication, to be published on 29 July 2016. Data are consistent with population estimates published on 23 June 2016 and will be consistent with the Index of Production statistical bulletin – to be published on 7 July 2016 and the current price trade in goods data within the UK trade statistical bulletin – to be published on 8 July 2016.

    Release content and context

  3. This release is the third estimate of GDP. Data content for each successive release of GDP varies according to availability.

  4. The preliminary estimate of GDP is based on output data alone. These are based on survey estimates for the first 2 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.

  5. For the second estimate of GDP output estimates, based on survey data, are available for all 3 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.

  6. For the quarterly national accounts (QNA) release, output survey data are available for all 3 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.

  7. 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.

  8. For more information on the different estimates of GDP, we have produced a short guide to the UK national accounts which gives more information on the principles of national accounting and the various publications available.

  9. For further information regarding non-seasonally adjusted data, please refer to the UK economic accounts. It can be downloaded directly from the UKEA dataset and on the UKEA main aggregates reference table.

    Leap year adjustments

  10. A methodological note on leap year adjustments was published on 29 February 2016, explaining how leap years might affect ONS time series and the methods used to adjust for them as part of seasonal adjustment. Economic Review March 2016 was published on 2 March 2016, providing further commentary on the economy, GDP and leap year effects.

    In this release a seasonal adjustment review has been undertaken of all series on the output components of GDP that show statistically significant leap year effects in light of new data for February 2016.

    Blue Book 2016 changes

  11. In this release, we have published revised figures for the UK national accounts, including gross domestic product (GDP) and balance of payments.

    Changes have been made in line with international standards adopted by all European Union (EU) member states and with worldwide best practice. These, and additional improvements we are making, will ensure that our national accounts continue to provide a reliable framework for analysing the UK economy and comparing it with other countries.

    The improvements made can be broadly split into 3 categories:

    • methodological improvements which impact on GDP; these include improvements to the data sources and methods used to estimate imputed rental and improved estimates of non-complicit value added tax fraud
    • improvements and corrections which do not impact on GDP; these include changes to the treatment of non-market output and social transfers in kind, incorporating the latest FDI benchmark, a correction to the measurement related to second homes and a correction/improvement to the measurement of shares and bonds
    • other regular improvements and methodological changes

    We published a series of articles in the lead up to this publication on 30 June 2016 which can be found on the national accounts articles page on our website. The most recent article Impact of methods changes to the national accounts and sector & financial accounts, Q1 1997 to Q1 2016, has been published on our website on 30 June 2016. Within this article, revisions analysis on the impact of Blue Book 2016 changes on Gross National Income (GNI) are presented in Annex H.

    Quarterly round changes

  12. In the Quarterly National Accounts release published today, we have taken the opportunity to standardise our publication of Annexes A to H. From 30 June 2016, the annex section in the bulletin will be replaced by datasets and will be included in UK Quarterly National Accounts datasets in Excel and as tables AA to AH in the pdf download as well as on the time series dataset. These are presentational changes and have no data impact and no data will be withdrawn.

  13. Government data on wages and salaries for the whole of the public sector (central government, local government and public corporations), consistent with that used in the calculation of the Public Sector Finances, are now being used to calculate public sector wages and salaries. Private sector wages and salaries are now calculated as private sector employees plus second jobs (sourced from the Labour Force Survey) multiplied by private sector average earnings including bonuses (sourced from Average Weekly Earnings). Variations in income in kind are then added to private sector wages and salaries to provide a total private sector measure allowing for growth in both “cash” and “in kind” employee income. Income in kind in the quarterly tail is measured in two ways: ONS-sourced estimates of: meals and drinks provided to selected occupations whilst working; accommodation provided free of charge or at significantly reduced prices to selected occupations; goods produced from the employer’s own production including free coal for miners; employee stock options. Forecasts of HMRC-sourced measures of: Cars and fuel provided for personal uses of employees; bonus shares distributed to employees; allowable employee expenses (formerly known as “Schedule E”). To bring the two sectors together Government data is subtracted from Total Economy data in the final supply and use balanced quarter to leave a private sector residual. A growth rate, calculated from the private sector data described above, is then applied to this residual to bring it up to the latest period. Finally, the series for the public sector, as described above, are added onto the private sector data in each period of the quarterly tail to create whole economy wages and salaries. As with the current method, seasonal adjustment is then carried out on the non-seasonally adjusted total. Wages and salaries in “Supply and use balanced years” (currently 1997 to 2014) are unaffected by this change. Likewise, estimates of Employer’s social contributions (D.12) are unaffected.

  14. During quality assurance of the Change in Inventories estimates for this Blue Book 2016 consistent release, we identified a processing error in the production system used to create the estimates. This has impacted on the chained volume measure estimates for Mining and Quarrying, contributing in part to the downwards revisions in 2015 and Quarter 1 2016. As later data has also been received for this period and the data has also been subject to GDP balancing, we are unable to quantify the exact impact of this error on the Mining and Quarrying estimates.

    National statistics quality review

  15. In line with the national statistics quality review (NSQR): review of national accounts and balance of payments, we have published a response, which can be found on the archived version of our website.

    National accounts work plan 2015 to 2018

  16. On 13 July 2015 users of national accounts were invited to respond to an informal consultation on the national accounts work plan which lays out a proposed set of priorities for the next 3 years. This consultation on the national accounts medium-term work plan (covering the period to 2018) closed on 25 September 2015. It followed a previous work plan for national accounts and related outputs following the consultation held in 2013.

    The final report of the national accounts medium-term work plan was published on our website on 27 November 2015.

    Special events

  17. We maintain a list of candidate special events in the special events calendar. Special events are events that are identifiable; they do not recur on a regular cycle (so are not targeted by seasonal adjustment) and have at least the potential to have an impact on statistics. As explained in our special events policy, it is not possible to separate the effects of special events from other changes in the series.

    Continuous improvement of GDP: sources, methods and communication

  18. The UK Statistics Authority published 2 new assessment reports on the Annual and Quarterly National Accounts and Supply and Use Tables and Input-Output Tables on 25 February 2015.

  19. In order to implement improvements reflected in the European System of Accounts 2010 (ESA2010), we will introduce a new survey to collect purchases data, and have published an article detailing our intentions along with a high level project plan.

    VAT project

  20. An article entitled HMRC VAT project update was published on 4 April 2016, the fourth in a series of articles. It outlined plans to use HMRC VAT turnover data as a pilot to replace MBS in summer 2016 for parts of the Index of Services and the Output approach to measuring GDP. Three previous articles have been published in this series:

    Feasibility study into the use of HMRC turnover data within Short-term Output Indicators and National Accounts, 14 August 2015.

    Exploitation of HMRC VAT data, 7 October 2015.

    "HMRC VAT project update" 21 December 2015.

    National accounts methodology and articles

  21. We regularly publish methodological information and articles to provide more detailed information on developments within the national accounts. This includes supplementary analyses of data to help users with the interpretation of statistics and guidance on the methodology used to produce the national accounts.

    National accounts classification decisions

  22. The UK national accounts are produced under internationally agreed guidance and rules set out principally in the European System of Accounts (ESA 2010) and the accompanying Manual on Government Deficit and Debt – Implementation of ESA 2010 – 2016 edition.

  23. In the UK, we are responsible for the application and interpretation of these rules. Therefore we make classification decisions based upon the agreed guidance and rules, and these are published on our website. Economic context

  24. We publish a monthly Economic Review discussing the economic background, giving economic commentary on the latest GDP estimate and our other economic releases. The next article will be published on 6 July 2016.

    Basic quality information for GDP statistical bulletin

  25. A Quality and Methodology Information report for this statistical bulletin can be found on our website.

    Important quality issues

  26. 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”. 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.

    Reliability

  27. Estimates for the most recent quarters are provisional and are subject to revision in the light of updated source information. We currently 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. Tables 3 and 4 provide a summary on the size and direction of the revisions that have been made to data covering a 5-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

  28. 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 August 2011 (Quarter 2 2011) to May 2016 (Quarter 1 2016). The analysis of revisions between month 2 and month 3 (third estimate of GDP) uses month 3 estimates published from August 2011 (Quarter 2 2011) to May 2016 (Quarter 1 2016).

  29. Table 4 shows the revisions to GDP growth between the estimate published 3 months after the end of the quarter and the equivalent estimate 3 years later. The analysis uses month 3 estimates, first published from September 2008 (Quarter 2 2008) to June 2013 (Quarter 1 2013) for GDP.

  30. 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 our website.

    Balancing GDP

  31. Information on the methods we use for balancing the output, income and expenditure approaches to measuring GDP can be found on our website.

  32. The different data content of the 3 approaches dictates the approach taken in balancing quarterly data. In the UK, there are far more data available on output than in the other 2 approaches. However, in order to obtain the best estimate of GDP (the published figure), the estimates from all 3 approaches are reconciled to produce an average.

  33. Annually, the estimates from all 3 approaches are reconciled through the creation of Input-Output Supply and Use tables for the years for which data are available.

  34. For years in which there is no supply and use balance, a statistical discrepancy exists that reflects the differences between the published headline estimate of GDP and the expenditure and income estimates.

  35. 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 that 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 3 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.

  36. Alignment adjustments, found in table M of 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. 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, for example.

  37. The size and direction of the quarterly alignment adjustments in Quarter 1 (Jan to Mar) 2016 indicate that in this quarter, the level of expenditure was higher than that of output while the level of income was lower than the level of output.

  38. Table 5 shows the balancing adjustments applied to the GDP estimates in this publication.

    Further information

  39. You can get the latest copies of this and all our other releases through the release calendar on our website.

  40. Details of the policy governing the release of new data are available from the media relations office. Also available is a list of the ministers and officials who have pre-publication access to the contents of this bulletin.

  41. 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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Contact details for this Statistical bulletin

Matthew Hughes
gdp@ons.gov.uk
Telephone: +44 (0)1633 45 5827