Final estimate for UK GDP revised upwards to -0.4 as the deflator finally reflects reality

The final estimate for UK GDP has been revised upwards to a still contractionary negative 0.4% from -0.7% during the first estimate.

From the government funded ONS release:

Headline figures

• UK gross domestic product (GDP) in volume terms decreased by 0.4 per cent between the first and second quarter of 2012, revised from a previously estimated decline of 0.5 per cent

• Output of the production industries fell by 0.7 per cent, revised up from the previously estimated decline of 0.9 per cent

• Manufacturing output fell by 0.8 per cent in the second quarter of 2012, revised up from the previously estimated decline of 0.9 per cent

• Output of the service industries fell by 0.1 per cent, unrevised from the previously published estimate

• Output of the construction industry fell by 3.0 per cent, revised up from the previously estimated 3.9 per cent fall

• Household final consumption expenditure decreased by 0.2 per cent in volume terms in the latest quarter, revised up from a previously estimated decline of 0.4 per cent

• In current price terms, compensation of employees rose by 0.2 per cent in the second quarter of 2012, revised down from a previously estimated increase of 1.2 per cent

It now means that in the previous 3 quarters the economy has now contracted by -1.1%. So unless next quarters’ GDP print comes in 1.1% (not going to happen) it will mean that the UK economy will have contracted for a whole year.

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It should be noted that one of our biggest bugbears is that in the past the ONS has used a GDP deflator that is wildly off from any sense of reality. The last time this happened was all the way back during the final quarter of 2008.

For example after the last GDP release for Q1 we noted:

That’s right, you read that correctly, according to the ONS the value of your money only lost 2% in value over the past year. But according to the CPI the number was 3.5% – that’s a huge difference of some 1.5%.

But finally that’s changed:

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Which has done this to the GDP deflator/CPI spread:

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However, we don’t think this trend will last, with all the massive global monetary inflation going on right now, and the BoE to get in the mix themselves sometime in November/December 2012 next years CPI numbers are going to be much higher than people think. And we’re sure that whilst the CPI will tick up, that GDP deflator will remain stubbornly lower.

Related posts:

1. UK GDP is running negative when using an ‘honest’ GDP deflator
2. Gold price finally breaks its 8 week trading range – so how much downside is left?
3. Horrible UK GDP revision all but guarantees Bank of England will print – Real GDP contracts a staggering 1.9%
4. Producer prices in the UK fall giving the Bank of England more scope to print
5. As UK Q2 GDP falls off a cliff, can will call it a depression yet?

Link to this article: : http://www.goldmadesimplenews.com/analysis/final-estimate-for-uk-gdp-revised-upwards-to-0-4-as-the-deflator-finally-reflects-reality-8159/

Posted by Thomas Paterson on Sep 27 2012. Filed under Analysis. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.