1. Main points

UK GDP in volume terms was estimated to have increased by 0.6% between Quarter 3 (July to Sept) 2015 and Quarter 4 (Oct to Dec) 2015, revised up 0.1 percentage points from the second estimate of GDP published on 25 February 2016. This is the 12th consecutive quarter of positive growth since Quarter 1 (Jan to Mar) 2013.

Between 2014 and 2015, GDP in volume terms increased by 2.3%, revised up 0.1 percentage points from the previous estimate. Between Quarter 4 2014 and Quarter 4 2015, GDP in volume terms increased by 2.1%, revised up 0.2 percentage points from the previously published estimate.

GDP in current prices increased by 0.2% between Quarter 3 2015 and Quarter 4 2015, revised up 0.2 percentage points from the previously published estimate.

GDP per head in volume terms was estimated to have increased by 0.4% between Quarter 3 2015 and Quarter 4 2015. Between 2014 and 2015, GDP per head increased by 1.5%.

The households and non-profit institutions serving households saving ratio was estimated to be 3.8% in Quarter 4 2015 compared with 4.8% in Quarter 3 2015. In 2015, the saving ratio was estimated to be 4.2%. The quarterly and annual savings ratios are the lowest since records began in 1963.

Real household disposable income decreased by 0.6% between Quarter 3 2015 and Quarter 4 2015.

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2. Understanding GDP

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 Quarter 1 (Jan to Mar) 2015.

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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 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 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 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 accounts 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?".

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5. Headline GDP components and GDP per head

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6. Historical context

As seen in Figure 1, GDP in the UK grew steadily during the 2000s until a financial market shock affected UK and global economic growth in 2008 and 2009. Economic growth resumed towards the end of 2009, but generally at a slower rate than the period prior to 2008. From the peak in Quarter 1 (Jan to Mar) 2008 to the trough in Quarter 2 (Apr to June) 2009, GDP decreased by 6.1%.

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 by 2.2% from the peak in Quarter 2 1990 to the trough in Quarter 3 1991. In the early 1980s downturn, GDP decreased by 5.6% from the peak in Quarter 2 1979 to the trough in Quarter 1 1981.

From Quarter 3 (July to Sept) 2009, growth continued to be erratic, with several quarters between 2010 and 2012 recording broadly flat or declining GDP. 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 2 2013.

Quarter 4 2015 has shown continued strength with GDP growing by 0.6% compared with the previous quarter; by 2.1% between Quarter 4 2014 and Quarter 4 2015, and by 2.3% between 2014 and 2015. GDP has now increased for 12 consecutive quarters, breaking a pattern of slow and erratic growth from 2009.

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7. GDP analysed by output categories, chained volume measures

Annex A contains output component growth rates back to Quarter 1 (Jan to Mar) 2015.

Three of the 4 main output industrial groupings within GDP showed increases in Quarter 4 (Oct to Dec) 2015 compared with Quarter 3 (July to Sept) 2015, with only production 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. All components within the service industries showed increases.

Production output decreased by 0.4% in Quarter 4 2015 compared with Quarter 3 2015, revised up 0.1 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%; electricity, gas, steam and air conditioning supply industries decreased by 2.2%, while manufacturing (the largest component of production) increased by 0.1% (Figure 2). Water supply and sewerage increased by 0.9%.

When comparing Quarter 4 2015 with Quarter 4 2014, production output increased by 0.8%, revised up 0.2 percentage points from the previously published estimate. Mining and quarrying, including oil and gas extraction, increased by 9.2%, while water supply and sewerage increased by 5.7%. Manufacturing fell by 1.0% between these periods while the electricity, gas, steam and air conditioning supply industries decreased by 1.7%.

Construction output increased by 0.3% in Quarter 4 2015, revised up 0.7 percentage points from the previously published estimate. Construction output increased by 1.0% between Quarter 4 2014 and Quarter 4 2015, revised up 0.6 percentage points from the previously published estimate.

The service industries increased by 0.8% in Quarter 4 2015 (Figure 3), revised up 0.1 percentage points from the previous estimate, marking the twelfth consecutive quarter of positive growth. This follows a 0.7% increase in Quarter 3 2015.

Output of the distribution, hotels and restaurants industries increased by 1.4% in Quarter 4 2015, following a 0.9% increase in Quarter 3 2015. The increase in the latest quarter was largely due to retail trade except of motor vehicles and motorcycles and wholesale and retail trade and repair of motor vehicles.

Output of the transport, storage and communication industries increased by 1.2% in Quarter 4 2015, following a 0.9% increase in Quarter 3 2015. The largest contributor to the increase was computer programming, consultancy and related activities.

Business services and finance industries’ output increased by 0.7% in Quarter 4 2015, following a 0.6% increase in Quarter 3 2015. The largest contributors to the increase were financial service activities, except insurance and pension funding and office administrative, office support and other business support activities.

Output of government and other services increased by 0.4% in Quarter 4 2015; this follows an increase of 0.5% in Quarter 3 2015. In the latest quarter the largest upward contribution came from activities of membership organisations.

Further detail on the service industries’ lower level components can be found in the Index of Services statistical bulletin published on 31 March 2016.

Gross value added (GVA) excluding oil and gas extraction increased by 0.6% in Quarter 4 2015 following a 0.4% increase in Quarter 3 2015.

Figure 4 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.

In the decade prior to the downturn, the service industries grew steadily, while production output was broadly flat over the same period. Construction activity grew strongly in the early part of the decade, and although there was a temporary decline in the mid-2000s, this was reversed by the end of 2007.

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 output falling from peak to trough by 17.1%, 12.3% and 10.6% respectively. In contrast, output in the service industries only fell by 4.1% 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 in both 2011 and 2012, falling below levels seen at the height of the downturn in 2009. Construction output also fell sharply in 2012, with output falling close to its 2009 trough after further contraction in Quarter 1 2013. Construction output improved over much of 2014 and continued this trend in the first half of 2015, before a contraction of 1.6% in Quarter 3 2015. Quarter 4 2015 has shown growth in construction output of 0.3%, and has increased by 1.0% from Quarter 4 2014. Although there has been growth across all major components of GDP since the start of 2013, the service industries remain the largest and steadiest contributor to overall economic growth, and are the only headline industry in which output has exceeded pre-downturn levels.

Figure 5 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 4 2015). 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 slightly slower average compound GDP growth in the 5 years following the economic downturn compared with the 5 years prior: this is also true of the service industries. Figure 5 shows that in Quarter 4 2015, only the service industries outperformed the post-downturn average rate of growth, although both construction and manufacturing industries have seen expansion of 0.3% and 0.1% respectively. In Quarter 4 2015, Output of the distribution, hotels and catering industries showed particular strength with an increase of 1.4%, rising from 0.9% growth in the previous quarter.

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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8. GDP analysed by expenditure categories, chained volume measures

Annex B contains expenditure component growth rates back to Quarter 1 (Jan to Mar) 2015.

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 0.7% in Quarter 4 (Oct to Dec) 2015. Annually, between 2014 and 2015 total domestic expenditure increased by 2.6%.

Household final consumption expenditure (HHFCE) increased by 0.6% in Quarter 4 2015, and has increased for 10 consecutive quarters (Figure 6). The largest contribution to the increase in HHFCE in Quarter 4 2015 came from furniture and furnishings. When compared with the same quarter a year ago, HHFCE has been rising each quarter since Quarter 4 2011, and was 2.7% higher in Quarter 4 2015 than in the same period a year ago. Between 2014 and 2015, HHFCE increased by 2.8%.

Note that in the quarters of 2013 only, “National” HHFCE chained volume measure data is not the sum of its components.

Figure 7 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 were the predominant driver of growth in recent periods, the contribution of non durable goods has been positive in the last 4 quarters. In Quarter 4 2015, consumption of non-durables contributed 0.2 percentage points, the same contribution as the previous quarter. Non-durable goods include items which can only be consumed or used once; a good example of these are food products.

Government final consumption expenditure increased by 0.3% in Quarter 4 2015, following a 0.7% increase in Quarter 3 2015. Between Quarter 4 2014 and Quarter 4 2015, government final consumption expenditure increased by 2.2%. Between 2014 and 2015, government final consumption expenditure increased by 1.5%.

Non-profit institutions serving households’ (NPISH) final consumption expenditure increased by 0.7% in Quarter 4 2015, following a 1.5% fall in Quarter 3 2015. Between Quarter 4 2014 and Quarter 4 2015, NPISH final consumption expenditure increased by 3.6%. Annually, NPISH final consumption expenditure increased by 1.2% between 2014 and 2015.

In Quarter 4 2015, gross fixed capital formation (GFCF) was estimated to have decreased by 1.1% (Figure 8). Between Quarter 4 2014 and Quarter 4 2015, GFCF increased by 2.1%. GFCF increased by 4.1% 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 31 March 2016.

Business investment was estimated to have fallen by 2.0% in Quarter 4 2015 and increased by 3.0% between Quarter 4 2014 and Quarter 4 2015. Annually, business investment increased by 5.2% between 2014 and 2015.

Including the alignment adjustment, the level of inventories increased by £3.4 billion in Quarter 4 2015, following an increase of £1.9 billion in Quarter 3 2015. Excluding the alignment adjustment, the level of inventories increased by £1.5 billion in Quarter 4 2015, following an increase of £2.3 billion in Quarter 3 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 £15.1 billion in Quarter 3 2015 to £16.4 billion in Quarter 4 2015 (Figure 9). The trade position reflects exports minus imports. Following a 0.5% decrease in Quarter 3 2015, exports increased by 0.1% in the latest quarter, while imports increased by 0.9% in Quarter 4 2015 following a 2.9% increase in Quarter 3 2015.

Exports of goods fell by 0.3% in Quarter 4 2015, due mainly to a decrease in chemicals which was partially offset by an increase in aircraft. Exports of services increased by 0.6% in Quarter 4 2015, due to an increase in telecommunications, computer and information services. In Quarter 4 2015, imports of goods increased by 0.6%, due to increases in oil and road vehicles which was partially offset by a fall in unspecified goods. Imports of services increased by 2.0% in Quarter 4 2015, due to an increase in other business services.

Between 2014 and 2015, exports increased by 5.1%, with increases in exports of services and exports of goods, while imports increased by 6.3%; reflecting an increase in both imports of goods and services.

Figure 10 shows a breakdown of the trade components and their contribution to GDP growth from Quarter 1 2008 to Quarter 4 2015. The series indicates that in the last 2 quarters the UK trade balance has made a negative contribution to GDP growth. When comparing Quarter 4 2014 with Quarter 4 2015, export of goods increased by 2.2% and contributed 0.4 percentage points to GDP growth. This was offset by the 3.1% growth in the import of goods, which contributed -0.8 percentage points to GDP growth.

Figure 11 shows the quarterly contribution of the expenditure components to the growth of GDP in chained volume measures. For Quarter 4 2015, 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 0.3 percentage points and gross fixed capital formation, which contributed a negative 0.2 percentage points.

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9. GDP implied deflator

Annex D contains implied deflator component growth rates back to Quarter 1 (Jan to Mar) 2015.

The GDP implied deflator at market prices for Quarter 4 (Oct to Dec) 2015 is 0.1% above the same quarter of 2014 (Figure 12). 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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10. GDP analysed by income categories at current prices

Annex C contains income component growth rates back to Quarter 1 (Jan to Mar) 2015.

GDP at current market prices increased by 0.2% in Quarter 4 (Oct to Dec) 2015, following a 0.6% increase in Quarter 3 (July to Sept) 2015. GDP at current market prices increased by 2.2% when compared with Quarter 4 2014. In 2015, GDP at current market prices increased by 2.6%.

Compensation of employees – which includes both wages and salaries, and employers’ social contributions, increased by 0.8% in Quarter 4 2015, following an increase of 0.8% in Quarter 3 2015 (Figure 13). Between Quarter 4 2014 and Quarter 4 2015, compensation of employees increased by 3.3%. In 2015, compensation of employees increased by 3.6%.

The gross operating surplus of corporations (effectively the profits of companies operating within the UK), including the alignment adjustment, decreased by 3.0% in Quarter 4 2015 compared with the previous quarter; this follows an increase of 0.7% in Quarter 3 2015 (Figure 14). Between 2014 and 2015, the gross operating surplus 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 less subsidies on products and production increased by 1.9% in Quarter 4 2015, following an increase of 0.3% in Quarter 3 2015. Between 2014 and 2015, taxes less subsidies on products and production increased by 2.2%.

Figure 15 shows the contribution made by income components to current price GDP. In Quarter 4 2015, there were positive contributions to GDP from compensation of employees which contributed 0.4 percentage points, other income which contributed 0.4 percentage points and taxes on products and production less subsidies which contributed 0.2 percentage points. The only negative contribution to GDP came from gross operating surplus (GOS) of corporations which contributed a negative 0.7 percentage points.

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11. GDP per head

In Quarter 4 (Oct to Dec) 2015, GDP per head increased by 0.4%, compared with Quarter 3 (July to Sept) 2015, revised up 0.1 percentage points from the previously published estimate. GDP per head is now 0.9% above its pre-downturn peak in Quarter 1 (Jan to Mar) 2008, having surpassed it in Quarter 2 (Apr to June) 2015. Headline GDP exceeded the level of its pre-downturn peak in Quarter 2 2013 and is now 6.8% above its pre-downturn peak (Figure 16).

Between Quarter 4 2014 and Quarter 4 2015, GDP per head increased by 1.3%, revised up 0.1 percentage points from the previously published estimate. Between 2014 and 2015, GDP per head increased by 1.5% compared with a growth of 2.1% between 2013 and 2014, both of these are unrevised from the previously published estimate.

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 25 June 2015 and the population projections used are those published on 29 October 2015.

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12. Sector accounts

Summary

Annually for 2015, 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.

In Quarter 4 (Oct to Dec) 2015, the central government, local government, public corporations, financial corporations, and households and non-profit institutions serving households sectors were net borrowers. The private non-financial corporations and rest of the world sectors were net lenders (Figure 17).

Compared with the previous quarter, there has been a switch from net lending to net borrowing in the financial corporations’ sector. All other sectors remain unchanged.

Compared with the previous year all sectors remain unchanged.

Table I has further detail.

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13. The household and non-profit institutions serving households (NPISH) sector

Saving ratio:

Annually for 2015 the saving ratio was 4.2%, compared with 5.4% in 2014.

The saving ratio for Quarter 4 (Oct to Dec) 2015 was 3.8%, compared with 4.8% in the previous quarter (Figure 18).

This fall in the latest quarter reflects a rise in final consumption expenditure and a fall in miscellaneous current transfers, partially offset by increased gross operating surplus and mixed income. Figure 19 shows the main components contributing to the quarterly saving ratio movement.

The decrease in the saving ratio in 2015 reflects rises in consumption expenditure, taxes on income and wealth and a fall in net property income, which are partially offset by rises in wages and salaries, gross operating surplus and mixed income.

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 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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14. Real household and NPISH disposable income

For the year 2015, real household and NPISH disposable income increased by 3.3% following an increase of 0.6% in 2014. This reflects a rise of 3.5% in nominal gross disposable income, partially offset by a 0.2% rise in the household and NPISH final consumption deflator. The increase in nominal gross disposable income was predominantly due to a rise in wages and salaries, net social benefits other than transfers in kind together with gross operating surplus and mixed income. This was partially offset by a rise in taxes on income and wealth and a fall in net property income.

The level of real household and NPISH disposable income decreased by 0.6% in Quarter 4 (Oct to Dec) 2015, following an increase of 1.6% in the previous quarter (Figure 20).

The fall in the latest quarter reflects a 0.6% rise in the nominal gross disposable income with a 1.2% increase in the household and NPISH final consumption deflator. The rise in nominal gross disposable income was due to a rise in gross operating surplus and mixed income partially offset by a fall in miscellaneous current transfers.

Figure 21 shows the main components contributing to the quarterly movement of households and NPISH gross disposable income.

What is real household 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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15. Private non-financial corporations' sector

For the year 2015, net lending was £32.3 billion following net lending of £28.6 billion in 2014. This increase was due to a rise in gross operating surplus and a fall in gross capital formation, partially offset by a fall in net property income and a rise in taxes on income and wealth.

Net lending of private non-financial corporations’ was £5.1 billion in Quarter 4 (Oct to Dec) 2015, following net lending of £10.5 billion in the previous quarter. This decrease in net lending in the latest quarter was due to a fall in net property income and gross operating surplus, partially offset by a fall in gross capital formation.

A more detailed commentary on the sector accounts is available.

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16. International comparisons for Quarter 4 (Oct to Dec) 2015

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, except Japan, when comparing Quarter 4 (Oct to Dec) 2015 with Quarter 3 (July to Sept) 2015 (Figure 22). The European Union (EU28) grew by 0.4% in Quarter 4 2015, marking 11 consecutive quarters of positive growth (Table 2). In the same period, the eurozone (EA19) expanded by 0.3%. When comparing Quarter 4 2014 with Quarter 4 2015, EA19 grew by 1.6% whilst the EU28 expanded by 1.8% (Figure 23).

Germany and France both saw their GDP increase by 0.3% between Quarter 3 2015 and Quarter 4 2015, following a similar increase in the previous quarter.

In Quarter 4 2015, the USA’s economy increased by 0.3%. Between Quarter 4 2014 and Quarter 4 2015, GDP for the USA increased by 2.0%. GDP for Japan decreased by 0.3% in Quarter 4 2015, following an increase of 0.3% in the previous quarter. However, between Quarter 4 2014 and Quarter 4 2015, Japan’s economy grew by 0.8%.

GDP for the Group of Seven (G7) countries increased by 0.2% in Quarter 4 2015, following a 0.4% increase in the previous quarter. When comparing Quarter 4 2014 with Quarter 4 2015, G7 GDP increased by 1.6% and is now 6.3% above its pre-recession peak in Quarter 1 (Jan to Mar) 2008.

More detailed information on these estimates can be found on the Eurostat website. 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 while information for the G7 countries can be found on the Organisation for Economic Co-operation and Development’s website.

Figure 24 shows GDP for the UK, EU, the USA and Japan, 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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17. Quarterly revisions

GDP and components, previously published on 25 February 2016

Figure 25 shows quarterly revisions between latest and previously published estimates of GDP. Quarter 1 (Jan to Mar) 2015 is the earliest period open for revision in this release.

Detailed revisions for the 3 GDP approaches

Sector accounts revisions, previously published 23 December 2015

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18 .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.gsi.gov.uk

    Release policy

  2. This release includes data available up to 21 March 2016. Data are consistent with that within the Index of Production statistical bulletin - published on 9 March 2016 and the current price trade in goods data within the UK trade statistical bulletin - published on 11 March 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.

    Blue Book 2016 changes

  10. In June 2016, we will publish revised figures for the UK national accounts, including gross domestic product (GDP) and balance of payments.

    Changes will be 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 in June 2016 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 are publishing a series of articles in the lead up to the publication on 30 June 2016 which can be found on the National Accounts articles page on our website. The most recent article detailed the Impact of Blue Book 2016 changes on chained volume measure gross domestic product, 1997 to 2011 and was published on our website on 23 March 2016. The next article will be published on 26 April 2016 and will detail the Impact on Sector Financial Accounts estimates, 1997 to 2011.

    Forthcoming changes

  11. As of the Quarterly National Accounts – Quarter 4 (Oct to Dec) 2015, published today, we have made changes to a few of the CDIDs (data identifiers) used within the publication. These are presentational changes to annual growth series to ensure consistency across the publication and have no data impact. This change applies to both the Second Estimate of GDP and Quarterly National Accounts publications in the statistical bulletins, datasets and time series datasets. See Table 3 for details of this change.

  12. In the Quarterly National Accounts release published today, we have taken the opportunity to combine 2 datasets which are currently published separately into one combined dataset. The2 tables which will be combined are ‘UK Historic Quarterly National Accounts Data Tables, 1948 to 1996’ and ‘UK Quarterly National Accounts Data Tables’ for 1997 onwards.

  13. In the Quarterly National Accounts release to be published on 30 June 2016, we will take 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.

    GNI estimates on an ESA 95 basis

  14. In September 2014, the UK National Accounts moved from being compiled and published on a European System of Accounts 1995 (ESA 95) basis to the ESA 2010 basis. Full details of these changes can be found on our website. As a result of these changes the UK Gross National Income (GNI) figures also increased in line with the changes in data sources, coverage and methodology. GNI figures are used by many other government departments and external bodies to form the basis of targets and metrics, for example there is a NATO target that 2% of GDP is spent on defence and an Organisation for Economic Co-operation and Development (OECD) target that 0.7% of UK GNI will be spent on international aid. To smooth the transition from ESA 95 to ESA 2010 for such targets, we published an analysis in October 2014 showing how the June 2014 ESA 95 GNI (consistent with the Quarter 1 (Jan to Mar) 2014 Quarterly National Accounts release) could be mapped to the September 2014 ESA 2010 GNI (the Quarter 2 (Apr to June) 2014 Quarterly National Accounts release consistent with Blue Book 2014). This analysis was then reproduced and extended for Blue Book 2015 in September 2015.

  15. We have committed to continue to provide an analysis of GNI on an ESA 95 basis for the calendar year 2015 although the process to produce this figure is less certain than the previous method. This increased uncertainty is because the figures for 2014 and 2015 have not yet been through the Supply and Use production process and are therefore subject to larger potential revision. The figures for 2014 and 2015 have been produced using the previous ESA 95 analysis for the calendar year 2013 as the starting point. The ESA 95 GNI figure for 2014 has been increased by the value of the revision to the ESA 2010 GNI figure for 2014 as published in the Quarter 3 (July to Sept) Quarterly National Accounts of December 2015. Then, using the growth of the ESA 2010 GNI estimates between 2014 and 2015 as published today in this Quarterly National Accounts release, we have applied this growth rate to the old ESA 95 GNI level for 2014 to produce and publish the first estimate of 2015 annual GNI on an ESA 95 basis alongside the Quarter 4 (Oct to Dec) 2015 GDP estimates.

    National Statistics Quality Review

  16. 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

  17. 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

  18. 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

  19. 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.

  20. 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

  21. On 21 December 2015, we published a further "HMRC VAT project update". This article further explores the opportunities for utilising data collected by HMRC from VAT returns as an administrative data source for Short-term Output Indicators, in particular plans to use HMRC turnover data as part of an estimate of nominal gross domestic product (GDP) and the strategic implications this has for National Accounts. This is the latest update in a series of articles. The first article “Feasibility study into the use of HMRC turnover data within Short-term Output Indicators and National Accounts” was published by us on 14 August 2015. This was followed by a second article "Exploitation of HMRC VAT data", published on 7 October 2015.

    National Accounts methodology and articles

  22. 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

  23. 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 – 2014 edition (MGDD).

  24. 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

  25. 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 April 2016.

    Basic quality information for GDP statistical bulletin

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

    Important quality issues

  27. 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

  28. 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

  29. Table 4 shows the revisions to month 1 (preliminary) and month 2 (second) estimates of GDP. The analysis of revisions between month 1 and month 2 uses month 2 estimates published from May 2011 (Quarter 1 2011) to February 2016 (Quarter 4 2015). The analysis of revisions between month 2 and month 3 (third estimate of GDP) uses month 3 estimates published from March 2011 (Quarter 4 2010) to December 2015 (Quarter 3 2015).

  30. Table 5 shows the revisions to GDP growth and the household saving ratio 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 March 2008 (Quarter 4 2007) to December 2012 (Quarter 3 2012) for GDP.

  31. 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 will be published on our website on 27 April 2016 with the Preliminary estimate of GDP release for Quarter 1 (Jan to Mar) 2016.

    Balancing GDP

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

  33. 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.

  34. 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.

  35. 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.

  36. 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.

  37. 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.

  38. The size and direction of the quarterly alignment adjustments in Quarter 4 (Oct to Dec) 2015 indicate that in this quarter, the level of expenditure was lower than that of output while the level of income was higher than the level of output.

  39. Table 6 shows the balancing adjustments applied to the GDP estimates in this publication.

    Further information

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

  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 charter for businesses and respondent charter for households, on our website.

    Code of practice

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

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Contact details for this Statistical bulletin

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