UK GDP in volume terms was estimated to have increased by 0.4% between Quarter 4 (Oct to Dec) 2015 and Quarter 1 (Jan to Mar) 2016, unrevised from the preliminary estimate of GDP published on 27 April 2016. This is the 13th consecutive quarter of positive growth since Quarter 1 2013.
Between Quarter 1 2015 and Quarter 1 2016, GDP in volume terms increased by 2.0%, revised down 0.1 percentage points from the previously published estimate.
GDP in current prices increased by 0.7% between Quarter 4 2015 and Quarter 1 2016.
GDP per head in volume terms was estimated to have increased by 0.2% between Quarter 4 2015 and Quarter 1 2016.Back to table of contents
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 a calendar year and the previous. Latest quarter-on-previous-quarter growth gives growth between a quarter and the quarter immediately before it. Latest quarter-on-corresponding-quarter-of-previous-year shows the growth between a 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) 2016.Back to table of contents
The second estimate of GDP is produced around 7 and a half weeks after the end of the quarter to provide a timely estimate of GDP. At this stage the data content of this estimate from the output measure of GDP has risen to around 80% of the total required for the final output based estimate. There is also around 50 to 60% data content available to produce estimates of GDP from the expenditure and income approaches.Back to table of contents
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 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?”Back to table of contents
Table 1: Economic indicators and GDP per head for the UK, Quarter 1 (Jan to Mar) 2016
|Current market prices||Chained volume measures|
|GDP||Compensation of employees||GDP||Household expenditure||Gross fixed capital formation||GDP per head|
|Source: Office for National Statistics|
|1. Percentage change on previous quarter|
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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. 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.
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 started growing at a steadier pace. Between Quarter 1 2015 and Quarter 1 2016 GDP has grown by 2.0%. GDP is now 7.2% above its pre-downturn peak and has been growing for 13 consecutive quarters.Back to table of contents
Annex A contains output component growth rates back to Quarter 1 (Jan to Mar) 2015.
Two of the 4 main output industrial groupings within GDP showed increases in Quarter 1 (Jan to Mar) 2016 compared with Quarter 4 (Oct to Dec) 2015; agriculture, forestry and fishing and services, while production and construction showed decreases 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 1 2016 compared with Quarter 4 2015, unrevised from the previously published estimate. Within the production sub-industries, output from mining and quarrying, including oil and gas extraction, decreased by 2.3%; manufacturing (the largest component of production) decreased by 0.4% (figure 2), while the electricity, gas, steam and air conditioning supply industries increased by 0.4%. Water supply and sewerage increased by 2.3%.
When comparing Quarter 1 2016 with Quarter 1 2015, production output increased by 0.1%, unrevised from the previously published estimate. Mining and quarrying, including oil and gas extraction, increased by 5.3%, while water supply and sewerage increased by 7.7%. Manufacturing fell by 1.3% between these periods while the electricity, gas, steam and air conditioning supply industries decreased by 3.2%.
Construction output decreased by 1.0% in Quarter 1 2016, revised down 0.1 percentage points from the previously published estimate. Construction output decreased by 1.8% between Quarter 1 2015 and Quarter 1 2016, revised down 0.1 percentage points from the previously published estimate.
The service industries increased by 0.6% in Quarter 1 2016 (Figure 3), unrevised from the previous estimate, marking the thirteenth consecutive quarter of positive growth. This follows a 0.8% increase in Quarter 4 2015.
Output of the distribution, hotels and catering industries increased by 1.1% in Quarter 1 2016, this follows an increase of 1.4% in Quarter 4 2015. The largest contributor to the increase was wholesale and retail trade and repair of motor vehicles and motorcycles.
Output of the transport, storage and communications industries increased by 0.7% in Quarter 1 2016, this follows an increase of 1.2% in Quarter 4 2015. The largest contributor to the increase was computer programming, consultancy and related activities.
Output of the business services and finance industries increased by 0.5% in Quarter 1 2016, this follows an increase of 0.7% in Quarter 4 2015. The largest contributors to the increase were imputed rent and financial service activities, except insurance and pension funding.
Output of the government and other services industries increased by 0.4% in Quarter 1 2016, this follows an increase of 0.4% in Quarter 4 2015. The largest contributor to the increase was human health activities.
Further detail on the service industries’ lower level components can be found in the Index of Services statistical bulletin published on 26 May 2016.
Gross value added (GVA) excluding oil and gas extraction increased by 0.4% in Quarter 1 2016 following a 0.6% increase in Quarter 4 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.
Industries have shown differing trends following the recent economic downturn between Quarter 1 2008 and Quarter 2 2009. 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 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 3.4% higher than 2014. This marks a deceleration of growth from 7.5% seen in 2014. In Quarter 1 2016 construction output contracted by 1.0% on a quarter on quarter basis, and by 1.8% 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 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 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 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 1 2016, none of the sectors outperformed their post-downturn average rate of growth with the service industries managing to match it. In Quarter 1 2016, both production and manufacturing industries have seen contractions of 0.4%, with construction contracting by 1.0%.
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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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 1 (Jan to Mar) 2016. Annually, between 2014 and 2015 total domestic expenditure increased by 2.6%.
Household final consumption expenditure (HHFCE) increased by 0.7% in Quarter 1 2016 and has increased for 11 consecutive quarters (Figure 6). The largest contribution to the increase in HHFCE in Quarter 1 2016 came from housing, water, gas, electricity and other fuels. When compared with the same quarter a year ago, HHFCE has been rising each quarter since Quarter 4 2011, and was 2.6% higher in Quarter 1 2016 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.
General government final consumption expenditure (GGFCE) increased by 0.4% in Quarter 1 2016, following a 0.3% increase in Quarter 4 2015. Between Quarter 1 2015 and Quarter 1 2016, GGFCE increased by 2.1%. Between 2014 and 2015, GGFCE increased by 1.5%.
Non-profit institutions serving households’ (NPISH) final consumption expenditure increased by 0.3% in Quarter 1 2016, following a 0.7% increase in Quarter 4 2015. Between Quarter 1 2015 and Quarter 1 2016, NPISH final consumption expenditure increased by 2.0%. Annually, NPISH final consumption expenditure increased by 1.2% between 2014 and 2015.
In Quarter 1 2016, gross fixed capital formation (GFCF) was estimated to have increased by 0.5% (Figure 7), following a decrease of 1.1% in Quarter 4 2015. Between Quarter 1 2015 and Quarter 1 2016, GFCF increased by 1.1%. 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 26 May 2016.
Business investment was estimated to have fallen by 0.5% in Quarter 1 2016 and decreased by 0.4% between Quarter 1 2015 and Quarter 1 2016. Annually, business investment increased by 5.2% between 2014 and 2015.
Including the alignment adjustment, the level of inventories increased by £3.5 billion in Quarter 1 2016, following an increase of £3.4 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 £16.4 billion in Quarter 4 2015 to £18.0 billion in Quarter 1 2016 (Figure 8). The trade position reflects exports minus imports. Following a 0.1% increase in Quarter 4 2015, exports decreased by 0.3% in the latest quarter, while imports increased by 0.8% in Quarter 1 2016 following a 0.9% increase in Quarter 4 2015.
Figure 9 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. Gross capital formation contributed a positive 0.3 percentage points, whilst general government final consumption expenditure contributed 0.1 percentage points. These positive contributions to GDP were partially offset by net trade, which contributed a negative 0.4 percentage points to GDP growth.
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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 1 (Jan to Mar) 2016 is 0.4% above the same quarter of 2015 (Figure 10). 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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Annex C contains income component growth rates back to Quarter 1 (Jan to Mar) 2015.
GDP at current market prices increased by 0.7% in Quarter 1 (Jan to Mar) 2016, following a 0.2% increase in Quarter 4 (Oct to Dec) 2015. GDP at current market prices increased by 2.5% when compared with Quarter 1 2015. 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 0.7% in Quarter 1 2016, following an increase of 0.8% in Quarter 4 2015 (Figure 11). Between Quarter 1 2015 and Quarter 1 2016, 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, increased by 0.8% in Quarter 1 2016 compared with Quarter 4 2015. This follows a decrease of 3.0% in Quarter 4 2015 (Figure 12). 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 on products and production less subsidies increased by 1.0% in Quarter 1 2016, following an increase of 1.9% in Quarter 4 2015. Between 2014 and 2015, taxes on products and production less subsidies increased by 2.2%.
Figure 13 shows the contribution made by income components to current price GDP. In Quarter 1 2016, there were positive contributions to GDP from compensation of employees which contributed 0.3 percentage points, gross operating surplus of corporations which contributed 0.2 percentage points and taxes on products and production less subsidies which contributed 0.1 percentage points.
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In Quarter 1 (Jan to Mar) 2016, GDP per head increased by 0.2%, compared with Quarter 4 (Oct to Dec) 2015. GDP per head is now 1.1% 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 7.2% above its pre-downturn peak (Figure 14).
Between Quarter 1 2015 and Quarter 1 2016, GDP per head increased by 1.3%. Between 2014 and 2015, GDP per head increased by 1.5% compared with a growth of 2.1% between 2013 and 2014.
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.Back to table of contents
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 (Table 2). The European Union (EU28) grew by 0.5% in Quarter 1 2016, marking 12 consecutive quarters of positive growth (Figure 15). In the same period, the group of Euro Area countries (EA19) expanded by 0.5%, following growth of 0.3% in Quarter 4 2015. When comparing Quarter 1 2015 with Quarter 1 2016, EA19 grew by 1.5% whilst the EU28 expanded by 1.7% (Table 2).
Germany and France saw their GDP increase by 0.7% and 0.5% respectively between Quarter 4 2015 and Quarter 1 2016, following an increase for both of 0.3% in the previous quarter.
In Quarter 1 2016, the USA’s economy increased by 0.1%, and by 1.9% between Quarter 1 2015 and Quarter 1 2016. GDP for Japan increased by 0.4% in Quarter 1 2016, following a decrease of 0.4% in the previous quarter. However, between Quarter 1 2015 and Quarter 1 2016, Japan’s economy remained stable.
The combined GDP for the Group of Seven (G7) countries increased by 0.3% in Quarter 1 2016 marking 13 quarters of consecutive growth. When comparing Quarter 1 2015 with Quarter 1 2016, G7 GDP increased by 1.5% and is now 6.6% above its pre-downturn peak in Quarter 1 (Jan to Mar) 2008. This compares to the EU28, which is currently 2.5% above the Quarter 1 2008 peak, and the EA19 at 0.4% above (Figure 17).
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.
Table 2: International GDP quarterly growth rate comparisons for selected economic areas, quarter-on-quarter, Quarter 1 (Jan to Mar) 2016
|Quarter on previous quarter % growth rates,|
|Chained volume, seasonally adjusted|
|Sources: Office for National Statistics, Organisation for Economic Co-operation and Development, Eurostat, United States Bureau of Economic Analysis, Statistics Japan|
|1. EU28 is the European Union|
|2. EA19 is the eurozone|
|3. G7 is the Group of Seven countries|
|4. Non-UK countries and groupings may show revisions in the back series due to NSI revisions|
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Figure 17 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. The US has had the strongest growth since the pre-downturn peak, and is currently 10.8% above the Quarter 1 2008 index.
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GDP and components, previously published on 27 April 2016
Figure 18 shows quarterly revisions between latest and previously published estimates of GDP. Quarter 1 (Jan to Mar) 2016 is the earliest period open for revision in this release.
Revisions for the output approach are shown in Annex E.Back to table of contents
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