Thursday, September 27, 2012
A rather different GDP picture
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

The revised Q2 gross domestic product figures - the Office for National Statistics' second GDP revision and third take on the numbers - showed the expected trimming of the fall from 0.5% to 0.4%. The latest estimate compares with an initial 0.7% decline. If the extra Jubilee bank holiday trimmed GDP by 0.5% in the second quarter, underlying growth was flat to marginally up.

Until the latest figures, GDP had fallen in five out of 12 quarters since the recovery began in mid-2009. One of those has now been revised away: the second quarter of 2011 now shows a small 0.1% GDP rise. There will be many more revisions to come.

The details of the latest release are interesting. Consumer spending fell by 0.2% in the second quarter, up from an initial 0.4% fall. This occurred despite an apparent 1.9% jump in household real disposable income. However, consumer spending is now thought to have grown modestly over the past year, by 0.2%, which sits more easily with the retail sales figures.

Business investment was revised higher, and government spending growth lower. The big drag on GDP over the past year has been net trade (exports minus imports), which subtracted 0.9 percentage points from growth, suggesting that eurozone woes have played a significant part in the UK's growth disappointments. More here.