Home > Data, UK GDP > UK 2014 Q2 Nominal GDP

UK 2014 Q2 Nominal GDP

I’m a bit late with this.  With the ESA10 revisions integrated into the national accounts we finally got an estimate of nominal GDP for Q2 in the Quarterly National Accounts.  The usual data dump: quarter-on-quarter growth at annual rates (US-style):

Year Nominal
Deflator Real
2013 Q1 3.7 1.6 2.1
2013 Q2 4.6 1.6 2.7
2013 Q3 7.7 4.0 3.5
2013 Q4 2.6 0.4 2.5
2014 Q1 3.4 0.4 3.0
2014 Q2 8.1 4.4 3.8

ONS q/q NGDP growth rates continue to be annoyingly volatile.  For the longer view of growth I’ll compare with the OBR forecasts from Budget 2014, which also shows the contrast with the old data before ESA10 revisions:

UK Nominal GDP vs OBR Forecast

Revised UK Nominal GDP vs OBR Forecast. Source: OBR, ONS YBHA

2012 does not look quite as bad as it did before.  There are a number of things which are mysterious about the 2012 data – mainly the fact that real GDP goes nowhere as employment soars.  Really, that data is just weird.  If there was a betting market in UK GDP revisions I’d bet 2012 can get revised up further.  Fast forward to 2014 and we do see nominal GDP growth at slightly above 5% y/y.  That is a good place to be.

Real GDP growth also looks less bad.  The Bank have been expecting upward RGDP revisions for a while, it will be interesting to see in the Inflation Report whether this matches expectations.

UK Real GDP vs OBR Forecast

Revised UK Real GDP vs OBR Forecast. Source: OBR, ONS ABMI

Prior to the revisions it was harder to make the case that the breakdown of GDP-by-income was consistent with what was happening in the labour market – not impossible, but hard.  The updated series for total nominal wage and salary compensation is in fact more consistent with happened to employment (hours worked).  Four quarter moving averages, growth rates:

Wage and Salary Compensation vs Total Hours Worked

Wage and Salary Compensation vs Total Hours Worked. Source: ONS YBUS , RPCG

The gap between the lines is (roughly) wage inflation: there isn’t any.

Categories: Data, UK GDP
  1. jamesxinxlondon
    October 16, 2014 at 09:15

    That last comment trail was getting a little elongated! Those deflator numbers look very low quality, in particular.

    The current “carnage” in markets, bond markets in particular, is getting quite helpful.

    “Traders” at the banks have always understood the power of monetary policy and responded accordingly. What we are now seeing is that many so-called expert economists and “financial market types” who sit one back from the traders are also getting it, and investors too. Hence the viciousness of current market moves.

    It is piling up pressure on central bankers and their political masters to do the right thing, and do it quickly. The focus is now much more on monetary policy and not fiscal policy or structural reforms. It is a sea-change from recent years, and a very healthy development.

  2. October 17, 2014 at 08:59

    Further to James’ point, it was striking that Bullard’s earlier (rather than recent) words … “When there is a mismatch between what the central bank is thinking and the market is thinking, that sometimes doesn’t end well, because there can be a surprise later on,” Mr. Bullard told reporters.

    “Right now, “the markets are making a mistake” and expect the Fed to maintain its ultra-easy policy stance longer than Fed officials themselves currently expect, Mr. Bullard said. When it comes to these expectations, “I would prefer that those be better aligned than they are.”

    … were so similar to Carney’s remarks also earlier this year such as this to the TSC “We were concerned that markets were not reacting to a fairly long run of data that had been as expected, if not a little better, and there had not been a change in the prediction for the first rise in interest rates.”

    Are markets actually policing and enforcing their own 5% NGDP growth target?

    The Bank staff (eg Haldane) becoming operatives.

    Time to accept this and go the whole hog?

  3. james in london
    October 17, 2014 at 09:23

    As if on cue, the new BoE Chief Economist’s speech for today released this morning says: “…recent evidence, in the UK and globally, has shifted my probability
    distribution towards the lower tail. Put in rather plainer English, I am gloomier.That reflects the mark-down in global growth, heightened geo-political and financial risks and the weak pipeline of inflationary pressures from wages internally and commodity prices externally. Taken together, this implies interest rates could remain lower for longer, certainly than I had expected three months ago, without endangering the inflation target” (Haldane).
    Good for him, but couldn’t we raise productivity by just subsituting Haldane and his staffers with a NGDP Futures index to steer monetary policy.

    Trouble is the ominous “without endangering the inflation target” means we are stuck in horrendous loop of hope followed by despair. Break the loop, abandon the inflation target. Why can’t Haldane and his brainy colleagues see the conundrum?

  4. October 17, 2014 at 09:29

    More ******* cricket metaphors! (Sorry Mr. Third Man) New cause of productivity crisis: too many smart people working to produce inflation forecasts rather than output. I agree! A dovish speech though.

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