What's New? Economic Analysis Additional supporting economic analysis relating to the Preliminary Estimate of GDP can be found in the Economic Review Special Events An article outlining the ONS policy on special events can be found in the Special events policy & article Continuous Improvement of GDP: sources, methods and communication An article providing an overview of current and planned continuous improvement work in relation to producing estimates of quarterly and annual GDP can be found in the Guidance and Methodology area.

Understanding the data Short guide to GDP Gross Domestic Product (GDP) is an integral part of the UK national accounts and provides a measure of the total economic activity in the UK. GDP is often referred to as one of the main 'summary indicators' of economic activity and references to 'growth in the economy' invariably refer to the growth in GDP during the latest quarter. In the UK three different but equivalent approaches are used in the estimation of GDP: GDP from the output or production approach - GDP(O) measures the sum of the value added created through the production of goods and services within the economy (our production or output as an economy). This approach provides the first estimate of GDP and can be used to show how much different industries (for example, agriculture) contribute within the economy.

GDP from the income approach - GDP(I) measures the total income generated by the production of goods and services within the economy. The figures breakdown this income into, for example, income earned by companies (corporations), employees and the self employed.

GDP from the expenditure approach - GDP(E) measures the total expenditures on all finished goods and services produced within the economy.

Interpreting the data Figures for the most recent quarter are provisional and subject to revision in light of (a) late responses to surveys and administrative sources, (b) forecasts being replaced by actual data and (c) revisions to seasonal adjustment factors which are re-estimated every quarter and reviewed annually.

Definitions and explanations Definitions found within the main statistical bulletin are listed here: Index number An index number is a number which indicates the change in magnitude relative to the magnitude at a specified point, the latter usually taken as 100. For example, the level of GDP for Q3 2012 is given in Table 1 as 103.0. This means that GDP is 3.0 per cent higher than the reference point, which in the case of GDP is 2009. Seasonal adjustment The index numbers in this statistical bulletin are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, due to holidays or other regular seasonal patterns. Unadjusted data are also available. Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events such as shopping activity before Christmas, and regular holidays such as the May bank holiday. Some features of the calendar are not regular each year, but are predictable if we have enough data - for example the number of certain days of the week in a month may have an effect, or the impact of the timing of Easter. As Easter changes between March and April we can estimate its effect on time series and allocate it between March and April depending on where Easter falls. Estimates of the effect of the day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustment. Deflation It is standard practice to present many economic statistics in terms of ‘constant prices’. This means that changes or growth are not affected by changes in price. The process of removing price changes is known as deflation and the resulting series is often described as volume (as opposed to value). The index numbers in this bulletin are volumes. Chained volume The indices in this bulletin are ‘chained volume’. This means that successive volume estimates are linked (or chained) together. The process of annual chain-linking was introduced in 2003. More information on chain-linking can be found in the Tuke and Reed (2001) (92.8 Kb Pdf) article.

Sample sizes and data content This is the first estimate of GDP, based on preliminary information for the quarter. Although based on a significant number of returns from businesses, there is still a lot of information to come in, particularly for the third month. The amount of data available at this stage is about 45 per cent of the total data that will be available in one years’ time. The estimates in this release are, however, based on a large amount of information returned by businesses across the whole of the economy. Information on activity (more specifically, turnover or sales) is requested each month from about 44,000 businesses for each of the first two months of the quarter and from about 15,000 businesses for the third month. In addition, the ONS collects price information on nearly 200,000 individual products each month from around 30,000 businesses. This information is used to remove the effect of price changes from the estimates.





Quality Basic Quality Information All estimates, by definition, are subject to statistical ‘error’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information, which allows the statistical error of previous statements to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures, and such mistakes are made quite clear when they do occur. Expectations of accuracy and reliability in early estimates are often too high. Revisions are an inevitable consequence of the trade off between timeliness and accuracy. Early estimates are based on incomplete data.

Summary Quality Report A Summary Quality Report for this statistical bulletin can be found on the ONS website. This report describes, in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

National Accounts revisions policy In accordance with the National Accounts revision policy, there are no periods open for revision in this release. This release includes information available up to 18 October 2012. The National Accounts revision policy is available in the National Accounts: Revisions statement (41.6 Kb Pdf) .

Revisions Triangles Spreadsheets giving revisions triangles (real time databases) of estimates from 1992 to date are available to download. They can be found under the section Revisions triangles for gross value added at basic prices, chained volume measure. The revisions triangles for the components of GDP have been temporarily removed following the recent move to the new SIC. They will be reinstated shortly. The revisions triangles for total GDP are still available and the service sector analysis is still separately available on a monthly basis via the Index of Services dataset. Revisions to data provide one indication of the reliability of key indicators. Tables 6 and 7 show summary information on the size and direction of the revisions which have been made to data covering a five year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. The result of the test is that the average revision is not statistically different from zero. Table 6 shows the revisions between the early estimates of GVA. The analysis of revisions between month 1 and month 2 uses month 2 estimates published from November 2007 (Q3 2007) to August 2012 (Q2 2012). The analysis of revisions between month 2 and month 3 uses month 3 estimates published from December 2007 (Q3 2007) to September 2012 (Q2 2012). Table 6: Revisions to early estimates of GVA growth Revisions to GVA growth Revisions between early estimates of GVA growth (quarterly, chained volume measure) GVA Growth in the latest period (per cent) Average over the last five years Average over the last five years without regard to sign (average absolute revision) Between M1 and M2 1.0 0.02 0.07 Between M2 and M3 1.0 -0.05 0.09 Table source: Office for National Statistics Download table XLS format

(30.5 Kb) Table 7 shows the revisions to GVA growth between the estimate published three months after the end of the quarter and the equivalent estimate three years later. The analysis uses month 3 estimates first published from December 2004 (Q3 2004) to September 2009 (Q2 2009). Table 7: Revisions to month 3 estimates of GVA growth Revisions to GVA growth Revisions between early estimates of GVA growth (quarterly, chained volume measure) GVA growth in the latest period (per cent) Average over the last five years Average over the last five years without regard to sign (average absolute revision) GVA growth (quarterly CVM) 1.0 -0.08 0.34 Table source: Office for National Statistics Download table XLS format

(30.5 Kb) An article titled 'Understanding the quality of early estimates of Gross Domestic Product', which was first published in December 2009, is available on the ONS website at: Understanding the quality of early estimates of Gross Domestic Product. This article presents an analysis of revisions to the early estimates of GDP based on a long period database of real time GDP back to 1955. This database is regularly updated and is available on the ONS website.

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Publication policy Details of the policy governing the release of new data are available from the press office. Also available is a list of those given pre-publication access to the contents of this release (27.2 Kb Pdf) . A complete set of series in the statistical bulletin are available to download within the data section of this publication. Alternatively, for low-cost tailored data, call Online Services on 0845 601 3034 or email tailored@statistics.gsi.gov.uk

Next publication: Tuesday 27 November 2012 (Second Estimate of GDP) Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport NP10 8XG Media contact: Tel: Luke Croydon +44 (0)845 6041858

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