GDP: 4 Points to Remember
Q4 GDP figures are out tomorrow. NIESR (who are usually pretty right) are forecasting growth of 0.7%, whilst survey data is a bit more bullish and points to a quarter on quarter growth rate of 1.0%.
The headline number will be closely watched tomorrow – as will the breakdown of growth between services, construction and industrial production. Whilst the top line figure will tell us something about the overall pace of the recovery, the sector breakdown will tell us about its balance.
There’s little point adding to the speculation about either number at this point – we’ll know one way or the other tomorrow morning. But here are four things to bear in mind tomorrow when the numbers are released.
It’s provisional data.
A boring point perhaps but a necessary one. This is the first of three estimates over the next few months and even then the data will be subject to revision. A slight slowdown from the 0.8% recorded in Q3 would not signal a recovery running out of steam, nor would a pickup imply that the recovery is necessarily gaining momentum.
The more interesting data comes later (the breakdown between investment, net trade, consumption and what is happening to profits, wages and household savings).
Tomorrow’s numbers don’t necessary tell us a great deal about living standards.
The squeeze on living standards is becoming one of the hottest political issues of the day. GDP data doesn’t necessarily tell us a great deal about exactly what is happening here. The third estimate (which won’t be out until after the Budget) will give details on real household disposable income but tomorrow’s numbers are too aggregated to give a clear picture.
According to the latest labour market statistics the total number of hours worked in the three months to November were up 1.1% on the previous quarter. We are comparing different time periods here, so an element of caution is needed, but quarterly growth much below 1.1% would imply output per hour worked (and hence productivity) is falling.
The UK is still in a deep hole.
The chart below is taken from the IMF World Economic Outlook database and compares GDP per capita (therefore adjusting for population growth) from 2007 to 2013 (2013 is an estimate).
In the case of the UK, we can see that we had an especially severe recession and a very weak (in terms of growth per head) recovery. Even a strong number tomorrow will leave a large gap to close.