UK 2012 Q3 Nominal GDP

First, Mark Carney!  The most interesting thing about Mark Carney is that he is not Paul Tucker.  If Osborne wanted more of the same from the Bank of England he would have picked Tucker.  But Osborne apparently went to some effort to hook Carney instead.  Significant?  Maybe not, maybe Carney is just the better candidate and there’s no more to it than that.   Plus Osborne got to score points over Ed Balls, who looked dazed and confused in Parliament yesterday as he tried to work out what to say.  “George did something right?  Now what do I say?”

And on to the GDP figures.  Everything you’ve read about a “bounce back” in Q3 after a holiday-ridden Q2 is still totally wrong.   We have two measures of demand growth to choose from: nominal GDP at market prices and nominal GVA at basic prices.  I prefer the latter for the UK; it measures spending (and hence revenue available for production) net of indirect taxes, so is not distorted by the VAT changes.   On the basic prices measure, Q2 demand growth was stronger than Q3.  And distortions between basic and current prices persist.  Quarter-on-quarter growth at annualized rates, seasonally adjusted:

Year	Nominal GDP (Market Prices)	Nominal GVA (Basic Prices)	GDP Deflator	GVA Deflator	Real GDP
2012 Q1	0.0	0.5	1.1	1.5	-1.2
2012 Q2	4.1	4.7	5.6	6.5	-1.6
2012 Q3	4.9	3.8	1.1	-0.4	3.9

So, good news: we had another quarter of reasonable demand growth (insofar as c.4% is “reasonable”) and the GVA deflator was negative.  Bad news, the Q2 deflator shock has not been revised away.

Taking a slightly wider view, the GDP statistics are looking awful from both a demand and a supply-side perspective.  There has been a slight recovery in demand growth, but no output growth to go with it.

UK Gross Value Added at Basic Prices.  Source: ONS

That is not a pretty picture.

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