National accounts revisions released today confirm the earlier estimate that constant-price GDP rose by 0.3% in the first quarter to stand 0.2% lower than a year before. The new figures, however, contain important changes in other aspects of the accounts:
- Current-price GDP is now estimated to have grown by 2.7% in the year to the first quarter versus 3.3% before, reflecting a downward revision to the rise in the deflator. This appears to weaken the argument made by the MPC's Andrew Sentance, among others, that current high consumer price inflation partly reflects a solid rebound in money GDP. On closer inspection, however, the revision is concentrated in the second quarter of 2009 and the new figures still show a significant acceleration in nominal expansion more recently, with current-price GDP rising at an annualised rate of 5.5% in the three quarters to this year's first quarter.
- Domestic demand was stronger than previously thought in the latest quarter and over the last year, with net exports correspondingly weaker. The demand upgrade was focused on fixed investment, which is now estimated to have risen by 5.7% from a trough in the second quarter of 2009 versus 1.6% previously. Worse trade performance partly reflected changes to the export and import deflators, resulting in a smaller portion of the observed rise in export values being attributed to increased volumes, and a larger portion for imports.
- The gross operating surplus of corporations was 4.7% lower than previously estimated in the first quarter, with income reallocated to employee compensation. Partly as a result, the household saving ratio remained at a respectable 6.9% in the first quarter, little different from the long-term average and far above the norm for the last decade – see chart. This may reduce concerns about a further rise in the ratio acting as a drag on consumer spending growth.
- Constant-price GDP is now estimated to have fallen by 6.4% during the recession versus 6.2% previously. Further major revisions, however, will occur in future years, with a significant cut in the output decline possible, based on the evolution of official data after the last three recessions and the "conundrum" of recent labour market resilience.
- Even on the current vintage of data, the recession was slightly less severe than the 1979-81 contraction once adjustment is made for North Sea oil and gas output – declining recently but rising then. Constant-price gross value added excluding oil and gas fell by 6.1% between the first quarter of 2008 and the third quarter of 2009 compared with a 6.4% drop between the second quarter of 1979 and the first quarter of 1981.
