UK 2012 Q3 GDP, Quarterly National Accounts

The “month 3″ GDP update for 2012 Q3 was published just before Christmas, so here I’m just catching up.

The QNA resolve what was something of a mystery – the GDP figures had previously shown strong nominal demand growth in 2012 Q2 with a very large deflator, leaving falling real GDP in that quarter.  This has now been revised away.  So here is the full breakdown for the quarterly growth rates over the last four quarters, figures are Seasonally Adjusted Annualized Rates as normal:

Year	Nominal GDP	GDP Deflator	Real GDP	Nominal GVA	GVA Deflator
2011 Q4	2.1	3.0	-1.1	2.3	3.5
2012 Q1	0.8	1.9	-1.0	1.5	2.3
2012 Q2	-1.0	0.4	-1.5	-1.3	0.4
2012 Q3	7.0	3.0	3.8	7.3	3.5

A few things of note:

a) The distortions between growth of nominal GDP at market prices and nominal GVA at basic prices (ex indirect taxes) are significant even in 2012.  I am not sure how to explain this; we have had some duty changes (alchocol, fuel) but these are mostly upward, yet here we see basic prices (ex taxes, GVA deflator) rising faster than market prices?  I’m confused, if anybody has any insight please leave a comment.

b) The very strong demand growth in Q3 has a favourable real/inflation split.  This is a kick in the teeth for the supply-side pessimists, in my view.  If the supply-side pessimists were really correct that kind of quarter should not happen.  I’d embrace a couple of years targeting a 7% NGDP growth path on that basis, 4% ish real growth and 3% ish inflation is just fine.

Looking at the broader view of year-on-year growth, again the supply-side is not looking quite as bad as in the month 2 update:

Breakdown of UK Gross Value Added (Basic Prices), Annual Growth Rates.

That chart uses the GVA basic price data to avoid the VAT distortions; output growth is tracking demand growth, with the deflator “wedge” just creeping up above 2% again.

Finally I’ll zoom out to the market monetarist’s chart of epic macro policy failure, the graph which must eventually be co-opted by all monetary policy experts as the true expression of their long held views.  We’re 15% below the old NGDP trend growth path and not really getting much better.

UK Nominal GDP vs Trend Growth

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