UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.7% between Q2 2014 and Q3 2014, unrevised from the previous estimate of GDP published 24 October 2014
Between Q3 2013 and Q3 2014, GDP in volume terms increased by 3.0%, unrevised from the previously published estimate
GDP in current prices was estimated to have increased by 1.6% between Q2 2014 and Q3 2014
GDP is an estimate of total economic activity in the UK. It is constructed by balancing the estimates from the output, income and expenditure approaches to measuring GDP, which in theory are all equal. For more information on how GDP is balanced see ‘Balancing GDP’ in the background notes section of this release.
Data in this release, unless otherwise stated, will have been seasonally adjusted (SA) with seasonal effects removed to allow comparisons over time. Estimates are given in chained volume measures (CVM), sometimes known as real terms, with the effects of inflation removed, or current prices (CP), sometimes known as nominal terms, without any adjustment for inflation.
Growth for GDP and its components 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.
The Second Estimate of GDP for Q3 2014 includes initial estimates on the expenditure and income approaches to GDP, along with revisions to, and more detail on, the output approach. In line with national accounts revisions policy, the only period open for revision in this release is Q3 2014.Back to table of contents
Table 1: Q3 2014
|Current market prices||Chained volume measures|
|Gross domestic product||Compensation of employees||Gross domestic product||Household expenditure||Gross fixed capital formation|
|Source: Office for National Statistics|
|1. Percentage change on previous quarter.|
Download this table Table 1: Q3 2014.xls (27.6 kB)
Figure 1: Quarterly growth and levels of GDP, table A2
Source: Office for National Statistics
Figure 1 shows 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 typically at a slower rate than the period prior to 2008. Quarterly growth in this period was also erratic, with several quarters between 2010 and 2012 recording flat or declining GDP. This two-year period coincided with special events (for example severe winter weather in Q4 2010 and the Diamond Jubilee in Q2 2012) that are likely to have affected growth. Since 2013, GDP has grown steadily, exceeding its pre-downturn peak in Q3 2013.
Figure 2 makes a comparison of the most recent economic downturn and recovery, with the other two most recent recessions. The profile of each subsequent recovery indicates the rate of time for GDP to return to pre-recession levels.
From the peak in Q1 2008 to the trough in Q2 2009, GDP decreased by 6.0%. Previous economic downturns in the early 1980s and early 1990s saw lower levels of impact on GDP. In the early 1990s downturn, GDP decreased by 2.2% from the peak in Q2 1990 to the trough in Q3 1991. In the early 1980s downturn, GDP decreased by 5.6% from the peak in Q2 1979 to the trough in Q1 1981.
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Annex A (41 Kb Excel sheet) contains growth rates back to Q1 2013.
The output components of GDP show across-the-board increases in Q3 2014, with agriculture, forestry & fishing, production, construction and services all expanding in Q3 2014.
Production output increased by 0.2% in Q3 2014 compared with Q2 2014. However, there was a mixed performance within sub-industries. Output from mining and quarrying including oil & gas extraction fell by 1.7%, the largest fall within production, while water supply & sewerage fell by 0.4% on the quarter. Manufacturing (the largest component of production) and electric, gas, steam & air industries both rose on the quarter, increasing by 0.4% and 2.6% respectively, with the former contributing most to the positive growth in production.
When comparing Q3 2014 with Q3 2013, production output rose by 1.9%. Manufacturing and electric, gas, steam & air contributed positively to this growth, increasing by 3.4% and 1.3% respectively ( see Figure 3), while mining & quarrying and water supply & sewerage contracted by 2.3% and 3.0% respectively.
Construction output increased by 0.8% in Q3 2014 and has risen by 3.0% since Q3 2013.
The service industries grew by 0.8% in Q3 2014 (see Figure 4), revised up 0.1 percentage points from the previous estimate, marking the seventh consecutive quarter of positive growth. This follows a 1.1% increase in Q2 2014. The increase in the latest quarter was broad-based; the largest contributions coming from the business services & finance and transport, storage & communications industries, which grew by 1.1% and 1.3% respectively.
Output of the distribution, hotels & restaurants industries rose by 0.7% in Q3 2014, revised up by 0.2 percentage points from the previous estimate. The 0.7% increase in the latest quarter was largely due to increases in wholesale trade, except of motor vehicles and motorcycles. In Q2 2014, distribution, hotels & restaurants industries output increased by 1.0%.
Output of the transport, storage & communication industries rose by 1.3% in Q3 2014 following a 1.5% increase in Q2 2014. The largest upward contribution to growth in Q3 2014 came from land transport services and transport services via pipelines, excluding rail and warehousing and support activities for transportation.
Business services & finance industries output rose by 1.1% in Q3 2014, following an increase of 1.5% in Q2 2014. The largest upward contribution to growth in Q3 2014 came from architectural and engineering activities; technical testing and analysis.
Output of government & other services rose by 0.2% in Q3 2014, following a 0.3% increase in Q2 2014. The increase in Q3 2014 was mainly due to human health activities and other personal service activities, including activities such as washing, dry-cleaning and hairdressing.
Further detail on the service industries lower level components can be found in the Index of Services statistical bulletin published on the same day as this release.
Gross value added excluding oil & gas extraction rose by 0.7% in Q3 2014, and by 0.9% in Q2 2014.
Figure 5 shows the path of GDP and its components (excluding agriculture), relative to their level of output achieved in Q1 2008. The construction, manufacturing and production industries were more acutely affected by the deterioration in economic conditions, falling from peak-to-trough by 17.1%, 12.6% and 11.6% respectively. In contrast, the service industry only fell by 4.0% in the same period.
Production activity began to grow again in 2010, with the manufacturing and construction industries showing particular strength, but 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 decreased sharply in 2012, with output close to its 2009 trough after further contraction in Q1 2013. However, clear improvement in this industry can be observed throughout 2014. Although there has been widespread growth across all major output components of GDP since the start of 2013, the service industries remain the largest and steadiest contributor to economic growth and the only component of GDP where output has exceeded pre-downturn levels.
Figure 6 shows the average compound quarterly growth rates for the five years before the economic downturn beginning in Q1 2008; the average between Q3 2009 and Q2 2014 (five years following the downturn), and the current quarterly growth rate observed in Q3 2014. Compound average growth is the rate at which a series would have increased/decreased if it had grown/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 five years following the economic downturn have experienced slightly slower average compound GDP growth compared with the period before the downturn; this pattern is also reflected in the services and construction industries. In the most recent period (Q3 2014) the production and construction industry have both outperformed the pre-downturn long run average. It should be noted that the third column, current quarterly growth rate, is based on only one data point and users should use caution when making direct comparisons with the long run averages.
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Annex B (38.5 Kb Excel sheet) contains expenditure component growth rates back to Q1 2013.
Gross domestic expenditure (the sum of all expenditure by UK residents on goods and services which is not used up or transformed in a productive process) rose by 1.2% in Q3 2014, following a 1.0% increase in Q2 2014.
Household final consumption expenditure rose by 0.8% in Q3 2014 and has increased for thirteen consecutive quarters (see Figure 7). Household final consumption expenditure, when compared with the same quarter a year ago, has been rising each quarter since Q4 2011 and was 2.4% higher in Q3 2014 than in the same period a year ago.
Government final consumption expenditure increased by 1.1% in Q3 2014, following a 1.0% increase in Q2 2014. Between Q3 2013 and Q3 2014, government final consumption expenditure increased by 1.7%.
Non-profit institutions serving households (NPISH) final consumption expenditure increased by 0.4% in Q3 2014, following a 1.3% increase in Q2 2014. Between Q3 2013 and Q3 2014, NPISH final consumption expenditure increased by 1.0%.
In Q3 2014, gross fixed capital formation was estimated to have increased by £0.7 billion (1.0%) since the previous quarter, to £73.2 billion (see Figure 8). This is its highest level since Q4 2007. Business investment is estimated to have fallen by an estimated £0.3 billion (-0.7%) since Q2 2014. However, it increased by 6.3% compared with the same quarter a year ago, and is still £2.6 billion higher than the pre-downturn peak in Q2 2008. The greatest contributor to the fall in business investment was from intellectual property products (IPP), and in particular the software component of this asset. Software investment has grown steadily since 1997 and reached a peak in Q2 2014.
More detail on gross fixed capital formation is available in the Business Investment statistical bulletin published on the same day as this release.
Including the alignment adjustment, the level of inventories increased by £4.5 billion in Q3 2014, following an increase of £3.0 billion in Q2 2014.
The trade balance deficit widened from £8.9 billion in Q2 2014 to £11.2 billion in Q3 2014 (see Figure 9). The trade position reflects exports minus imports. Following a 0.4% decrease in Q2 2014, exports fell by 0.4% in the latest quarter, while imports increased by 1.4%. With exports contracting and imports increasing, the net trade balance worsened when compared to the previous quarter.
Figure 10 shows the quarterly contribution of the expenditure components to the growth of GDP in chained volume measures. The largest contribution to growth came from household final consumption expenditure, which contributed 0.5 percentage points to GDP, while gross fixed capital formation made a smaller contribution of 0.2 percentage points. Changes in inventories contributed 0.3 percentage points. With exports falling and imports increasing this quarter, net trade’s contribution was minus 0.5 percentage points.
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Annex D (36.5 Kb Excel sheet) contains implied deflator component growth rates back to Q1 2013.
The gross domestic product implied deflator at market prices for Q3 2014 is 2.1% above the same quarter of 2013 (see Figure 11). The GDP implied deflator is calculated by dividing current price (nominal) GDP by chained volume (real) GDP and multiplying by one hundred to convert to an index. It is not used in the calculation of GDP; the deflators for expenditure components, which are the basis for the implied GDP deflator, are used to calculate nominal GDP not real GDP.
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Annex C (32 Kb Excel sheet) contains income component growth rates back to Q1 2013.
GDP at current market prices rose by 1.6% in Q3 2014, following a 1.9% increase in Q2 2014. GDP at current market prices rose by 5.1% when compared to Q3 2013.
Compensation of employees which includes both wages & salaries and pension contributions - increased by 1.2% in Q3 2014, following an increase of 1.5% in Q2 2014 (see Figure 12).
The gross operating surplus of corporations – effectively the profits of companies operating within the UK – including the alignment adjustment, rose by 3.6% in Q3 2014 compared with the previous quarter; this follows an increase of 3.2% in Q2 2014 (see Figure 13).
Taxes less subsidies on products and production fell by 0.2% in Q3 2014, following an increase of 1.8% in Q2 2014.
Figure 14 shows the contribution made by income components to current price GDP during Q3 2014. The positive contribution to growth came mainly from two of the components, with contributions from compensation of employees and gross operating surplus of 0.6 and 0.8 percentage points respectively.
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In Q3 2014, GDP for the Eurozone quarter-on-quarter increased by 0.2%, while GDP for the European Union (EU 28) grew by 0.3% (see Table 2 and Figure 15). This is the sixth consecutive quarter of growth for the EU28 economy. When compared to Q3 2013, GDP for the Eurozone expanded by 0.8%, while GDP for the EU28 increased by 1.3% (see Figure 16). France and Germany grew by 0.3% and 0.1% respectively in Q3 2014, following contractions of 0.1% for both economies in Q2 2014. Following a 1.1% increase in Q2 2014, GDP for the United States of America rose by 0.9% in Q3 2014. GDP for the United States of America grew by 2.3% between Q3 2013 and Q3 2014. The Japanese economy contracted by 0.4% in Q3 2014, following a contraction of 1.9% in Q2 2014.
Figure 17 shows GDP for the UK, EU, the United States of America and Japan, all indexed to Q1 2008 (the pre-downturn peak in the UK).
Table 2: International GDP quarterly growth rate comparisons for selected economic areas, quarter-on-quarter
|chained volume, seasonally adjusted|
|EU28||Eurozone||France||Germany||Japan||United Kingdom||United States of America|
|Source: Office for National Statistics|
Download this table Table 2: International GDP quarterly growth rate comparisons for selected economic areas, quarter-on-quarter.xls (27.6 kB)
More detailed information on these estimates can be found on the Eurostat website. Information on the estimates for the United States of America can be found on the Bureau of Economic Analysis website, while information on the estimates for Japan can be found on the Japanese Cabinet Office website.Back to table of contents
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