UK GDP may avoid Q4 contraction
Simon Ward
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On the initial estimate, UK GDP rose by a stronger-than-expected 0.5% between the second and third quarters. The monthly pattern of output, moreover, implies positive carry-over, reducing the risk of a contraction of GDP in the current quarter. The numbers, however, are of limited value because of their volatility and susceptibility to large revisions.
A monthly GDP series can be calculated from data on services, industrial and construction output, which account for 99.3% of the total. The monthly output numbers are available up to August and a September estimate can be backed out from the quarterly data in the GDP report. GDP appears to have risen strongly through the quarter, with the September level 0.8% above the quarter average – see chart.
This September excess implies, on the face of it, that GDP could fall by 1.0% by December – assuming that the decline is spread evenly across the three months – without the fourth quarter showing a contraction from the third.
The implied September GDP estimate is 1.0% higher than a year earlier while combined services and industrial output gained 1.6% over the 12 months, to stand “only” 2.3% below its level in the first quarter of 2008, when the recession began. These numbers accord with business surveys suggesting modest growth over the last year and contradict claims that the economy has been “flat-lining”.
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