Tuesday, June 28, 2011
Overstating real income weakness?
Posted by David Smith at 12:00 PM
Category: Thoughts and responses

A clutch of data from the Office for National Statistics, of which the least notable was the first quarter gross domestic number, which was unrevised at 0.5%, following a 0.5% drop in the final quarter of 2010. So the "flat" story is maintained, though this is a strange way of presenting the figures.

GDP was hit by 0.5% by poor weather in Q4 2010, made up part of this loss in Q1 2011, but some of the loss was permanent. Underlying growth in Q1 is suggested by the 0.9% growth in services and a 0.7% expansion in manufacturing but was knocked back by weak construction and weak energy output. The first looks implausible, the second temporary.

There were some back revisions in the GDP numbers. Growth in Q1 2010 was revised up by 0.2 percentage points, while growth in Q3 was revised down by 0.1.

The most eye-catching number, however, was for real household disposable incomes, down 0.8% in Q1, following a 0.9% drop in Q4 2010. Incomes were 2.7% lower than a year earlier. This looks implausibly large? Why, because other ONS figures show that employment rose by 1.4% over the year to Q1.

Unless all these jobs were very low paid, the rise in employment should have compensated, at least in part, for the drop in per capita incomes. Once again, the GDP numbers sit uneasily alongside the labour market statistics. More here.

Also released, first quarter balance of payments statistics, which show that the current account deficit narrowed to 9.4 billion, 2.5% of GDP, from 13 billion in Q4 2010. More here.