Key Findings UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.8% between Q4 2013 and Q1 2014, unrevised from the second estimate of GDP published 22 May 2014.

GDP is estimated to have increased by 1.7% in 2013, compared with 2012, unrevised from the estimate published on 22 May 2014.

Between Q1 2013 and Q1 2014, GDP in volume terms increased by 3.0%, revised down 0.1 percentage points from the previously published estimate.

The households’ saving ratio was estimated to be 4.9% in Q1 2014.

Real households’ disposable income fell by 0.2% between Q4 2013 and Q1 2014.

GDP in current prices was estimated to have increased by 1.3% between Q4 2013 and Q1 2014, revised up 0.1 percentage points from the previously published estimate.

What is GDP? GDP is an estimate of total economic activity in the UK. It is constructed by balancing the estimates from the output, income and expenditure approaches to measuring GDP which in theory are all equal. For more information on how GDP is balanced, see ‘Balancing GDP’ in the background notes section of this release. Data in this release, unless otherwise stated, will have been seasonally adjusted (SA) with seasonal effects removed to allow comparisons over time. Estimates are given in chained volume measures (CVM), sometimes known as real terms, with the effects of inflation removed, or current prices (CP), sometimes known as nominal terms, without any adjustment for inflation. Growth for GDP and its components is given between different periods. Latest year on previous year gives the annual growth between one calendar year and the previous calendar year. Latest quarter on previous quarter growth gives growth between one quarter and the quarter immediately before it. Latest quarter on corresponding quarter of previous year shows the growth between one quarter and the same quarter a year ago. This third estimate of GDP for Q1 2014 includes revisions to, and more detail on, the output, expenditure and income approaches to GDP. Also included are data on the institutional sector accounts, including the households’ saving ratio and real household disposable income. In line with national accounts revisions policy, the earliest period open for revision in this release is Q1 2013.

Headline Sector Accounts, GDP and Selected Components Table 1: Q1 2014 Gross Domestic Product Households' saving ratio Real households' disposable income Current market prices Chained volume measure Chained volume measure % %1 2010=100 2010=100 %1 Seasonally adjusted Q2 2012 8.1 2.3 103.8 101.0 -0.4 Q3 2012 7.8 -0.4 104.6 101.7 0.8 Q4 2012 6.1 -1.0 106.5 101.5 -0.2 Q1 2013 4.2 -1.7 107.2 102.1 0.5 Q2 2013 6.0 2.1 107.6 102.7 0.7 Q3 2013 5.8 0.8 108.7 103.6 0.8 Q4 2013 4.8 -0.7 110.7 104.3 0.7 Q1 2014 4.9 -0.2 112.2 105.1 0.8 Table source: Office for National Statistics Table notes: 1 Percentage change on quarter from previous quarter. Download table XLS format

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Historical Context Figure 1: Quarterly growth and levels of GDP, table A2 Source: Office for National Statistics Download chart XLS format

(24.5 Kb) Figure 1 shows the quarterly path of GDP over the last 26 years. It shows the steady economic growth in the UK from the mid 1990s through to 2008 when, partly due to a financial market shock, the UK suffered an economic downturn. Figure 2 compares economic downturns since the 1970s, showing that the most recent downturn was the deepest in post-war history, with GDP falling by 7.2% between its peak in Q1 2008 to its trough in Q2 2009. The recovery in GDP since Q2 2009 has also been more subdued compared to past experience. However, the UK economy has shown signs of increasing momentum throughout 2013 and in the first quarter of 2014. Figure 2: GDP quarter-on-quarter growth from peak for previous and latest economic downturns Source: Office for National Statistics Download chart XLS format

(35 Kb) The latest figures for Q1 2014 show the UK recovery continuing with GDP in real terms growing by 0.8% compared with the previous quarter and by 3.0% between Q1 2013 and Q1 2014, the strongest quarter on same quarter a year ago growth since before the economic downturn. GDP is now only 0.6% below the pre-economic downturn level. From the output approach, services have surpassed their pre-downturn peak while production and construction output continues to grow. The expenditure measure shows continued growth in gross fixed capital formation and the largest component, household final consumption expenditure. The income measure shows strong growth in gross operating surplus of corporations for the third consecutive quarter.

GDP Analysed by Output Categories, Chained Volume Measures, Tables B1 and B2 Annex A (29.5 Kb Excel sheet) contains growth rates back to Q1 2013. The output measure shows a broad-based rise in GDP for Q1 2014 with agriculture forestry & fishing, production, construction and services all expanding on the quarter. Total production output grew by 0.7% in Q1 2014 compared with Q4 2013. Mining and quarrying including oil & gas extraction increased by 0.8% in Q1 2014. Manufacturing (the largest component of production) increased by 1.5% between Q4 2013 and Q1 2014 (see Figure 3), revised up 0.1 percentage points from the previous estimate and contributed 0.2 percentage points to the 0.8% increase in GDP in Q1 2014. This is the largest increase in manufacturing since Q2 2010 when it grew by 2.0%. Output from water supply & sewerage also increased in Q1 2014. Electricity, gas, steam & air fell by 6.4% in Q1 2014, the only industry grouping within production to have fallen in this period.

Figure 3: Manufacturing growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(19 Kb) When comparing Q1 2014 with Q1 2013, production output rose by 2.4%. All production industries contributed positively to this growth, with the exception of electricity, gas, steam and air conditioning, which contracted by 13.3% as demand for electricity and gas in March 2014 was lower than the same period a year ago. This is likely to be attributable to the warmer March weather in 2014. Between Q1 2013 and Q1 2014, manufacturing output rose by 3.6%, revised up 0.1 percentage points from the previous estimate. Construction output increased by 1.5% in Q1 2014 compared with Q4 2013, revised up from the previously estimated 0.6% increase. Between Q1 2013 and Q1 2014 construction output increased by 6.7%. The service industries grew by 0.8% in Q1 2014 (see Figure 4), revised down 0.1 percentage points from the previous estimate. This follows a 0.7% increase in Q4 2013, marking Q1 2014 as the fifth consecutive quarter of positive growth. The increase in the latest quarter was broad-based, the largest contributions coming from the wholesale & retail industries and the scientific, administration & support industries, which each grew by 1.9%.

Figure 4: Services growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(18.5 Kb) Output of the distribution, hotels & restaurants industries rose by 1.7% in Q1 2014, unrevised from the previous estimate. The 1.7% increase in the latest quarter was largely due to increases in wholesale trade except of motor vehicles & motorcycles. In Q4 2013 distribution, hotels & restaurants industries output increased by 0.5%. Output of the transport, storage & communication industries rose by 0.6% in Q1 2014, revised down from the previously published 0.9% increase. This follows a 0.3% increase in Q4 2013. The largest upward contribution to growth in Q1 2014 came from land transport services and transport services via pipelines, excluding rail transport. Business services & finance industries output rose by 0.9% in Q1 2014, unrevised from the previously published estimate. In Q4 2013 business services & finance output rose by 1.0%. The largest upward contribution to growth in Q1 2014 came from other professional, scientific & technical activities. Output of government & other services rose by 0.2% in Q1 2014,and was revised downwards by 0.1 percentage points from the previous estimate, following a 0.7% increase in Q4 2013. The increase in Q1 2014 was mainly due to human health activities. Further detail on the service industries lower-level components can be found in the Index of Services statistical bulletin published on the same day as this release. Gross value added excluding oil & gas extraction rose by 0.8% in Q1 2014, and 0.7% in Q4 2013. Figure 5 shows output components indexed to Q1 2008 (the economy’s pre-downturn peak). Services output has now surpassed its pre-downturn peak by 1.9 percentage points having increased by 2.8% between Q1 2013 and Q1 2014. However it is the only headline industry to achieve this milestone, with the production, construction and agriculture industries remaining below their respective peaks. Within production, manufacturing output was 7.6% below pre-downturn levels. Figure 5: GDP output components growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

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GDP Analysed by Expenditure Categories, Chained Volume Measures, Table C2 Annex B (26.5 Kb Excel sheet) contains growth rates back to Q1 2013. Gross domestic expenditure (the sum of all expenditure by UK residents on goods and services which are not used up or transformed in a productive process) rose by 0.5% in Q1 2014, revised down 0.2 percentage points from the previously published estimate. Household final consumption expenditure rose by 0.8% in Q1 2014, unrevised from the previous estimate (see Figure 6). This is the tenth consecutive quarter-on-quarter increase and follows a 0.3% increase in Q4 2013. The largest increases in household final consumption expenditure in Q1 2014 came from transport and miscellaneous goods & services. Household final consumption expenditure, when compared with the same quarter a year ago, has been rising each quarter since Q1 2012 and was 2.2% higher in Q1 2014 than in the same period a year ago.

Figure 6: Household final consumption expenditure growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(18.5 Kb) Government final consumption expenditure was unchanged in Q1 2014, revised down 0.1 percentage points from the previous estimate and follows a 0.1% fall in Q4 2013. Between Q1 2013 and Q1 2014, government final consumption expenditure increased by 1.8%. Non-profit institutions serving households (NPISH) final consumption expenditure fell by 2.3% in Q1 2014, revised down 0.1 percentage points from the previous estimate and follows a 1.0% decrease in Q4 2013. Between Q1 2013 and Q1 2014 NPISH final consumption expenditure fell by 0.6%. Gross fixed capital formation (the purchase and disposal of fixed assets used in the production process for more than a year) increased by 2.4% in Q1 2014 (see Figure 7), revised up from the previously estimated 0.6% increase. This follows a 1.3% increase in Q4 2013. Between Q1 2013 and Q1 2014, gross fixed capital formation rose by 9.7%. Within gross fixed capital formation, business investment increased by 5.0% between Q4 2013 and Q1 2014, revised up from the previously estimated 2.7% increase. This follows a 1.5% increase in Q4 2013. More detail on gross fixed capital formation is available in the Business Investment statistical bulletin published on the same day as this release.

Figure 7: Gross fixed capital formation growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(18.5 Kb) Excluding the alignment adjustment, the level of inventories rose by £3.3 billion in Q1 2014, following an increase of £1.7 billion in Q4 2013. Including the alignment adjustment, the level of inventories increased by £1.9 billion in Q1 2014, following an increase of £3.2 billion in Q4 2013. The trade balance deficit decreased from £5.5 billion in Q4 2013 to £4.2 billion in Q1 2014 (see Figure 8). The trade position reflects exports minus imports. Following a 0.9% rise in Q4 2013, exports fell by 0.1% in Q1 2014, while imports fell by 1.3% in Q4 2013 and by 1.2% in Q1 2014. Exports of goods fell by 1.3% in Q1 2014, due to a fall in semi-manufactured goods (chemicals and materials). Exports of services rose by 1.6% in Q1 2014 mainly due to an increase in financial services. In Q1 2014 imports of goods fell by 1.1%, due to a decrease in fuels and oil imports in particular. Imports of services decreased by 1.5% in Q1 2014 due to falls in travel services and financial services. With exports contracting to a lesser extent than imports, the net trade balance has improved compared to the previous quarter, but worsened slightly compared to Q1 2013.

Figure 8: Trade balance, £ billion Source: Office for National Statistics Download chart XLS format

(18.5 Kb) Figure 9 shows the quarterly contribution of the expenditure components to GDP growth in the latest quarter. The largest contribution came from household final consumption expenditure (0.5%) while gross fixed capital formation made a smaller contribution of 0.3%. Changes in inventories made a negative contribution of 0.3%. With exports falling less than imports this quarter, net trade made a positive 0.3% contribution to GDP. Figure 9: Expenditure components contribution to GDP growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

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GDP Implied Deflator Annex D (25.5 Kb Excel sheet) contains growth rates back to Q1 2013. The gross domestic product implied deflator at market prices for Q1 2014 is 1.6% above the same quarter of 2013 (see Figure 10). The GDP implied deflator is calculated by dividing current price (nominal) GDP by chained volume (real) GDP and multiplying by 100 to convert to an index. It is not used in the calculation of GDP; the deflators for expenditure components, which are the basis for the implied GDP deflator, are used to calculate nominal GDP not real GDP. Figure 10: GDP at market prices implied deflator, quarter on same quarter of previous year Source: Office for National Statistics Download chart XLS format

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GDP Analysed by Income Categories at Current Prices, Table D Annex C (23 Kb Excel sheet) contains growth rates back to Q1 2013. GDP at current market prices rose by 1.3% in Q1 2014, following a 1.8% increase in Q4 2013. GDP at current market prices rose by 4.7% when compared to Q1 2013. Compensation of employees – which includes both wages & salaries and pension contributions - increased by 0.8% in Q1 2014, unrevised from the previous estimate. This follows an increase of 0.4% in Q4 2013 (see Figure 11). Compensation of employees rose by 4.1% between Q1 2013 and Q1 2014.

Figure 11: Compensation of employees growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(18.5 Kb) The gross operating surplus of corporations – effectively the profits of companies operating within the UK – including the alignment adjustment, rose by 2.0% in Q1 2014, compared with the previous quarter; revised up 0.5 percentage points from the previously published estimate. This follows an increase of 6.0% in Q4 2013 (see Figure 12). Between Q1 2013 and Q1 2014, gross operating surplus of corporations rose by 3.5%. On an unaligned basis, private non-financial corporations’ operating surplus fell by 0.4% in Q1 2014, following a 4.9% increase in Q4 2013. Private non-financial corporations’ operating surplus on an aligned basis rose by 1.3% in Q1 2014, following an increase of 6.9% in Q4 2013.

Figure 12: Gross operating surplus of corporations' growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(18.5 Kb) Taxes less subsidies on products and production fell by 0.6% in Q1 2014, following an increase of 1.7% in Q4 2013. Figure 13 shows the contribution made by income components to current price GDP during Q1 2014. Other income, compensation of employees and gross operating surplus of corporations all contributed positively to GDP growth in the latest quarter. These contributed 0.5, 0.4 and 0.4 percentage points respectively. Private non-financial corporations' (PNFC) gross operating surplus - the largest component of gross operating surplus of corporations - contributed 0.2 percentage points to current price GDP growth in Q1 2014. Gross operating surplus of financial corporations and public corporations each contributed 0.1 percentage points to current price GDP growth. Figure 13: Income components contribution to GDP growth, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

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Sector Accounts, Tables I, J1, J2, J3, K1 and K2 Summary Annually for 2013, the central government, local government, financial corporations and household sectors were net borrowers. Public corporations, private non-financial corporations and the rest of the world sectors were net lenders. In Q1 2014, the central government and household sectors were net borrowers. The local government, public corporations, financial corporations, private non-financial corporations and rest of the world sectors were net lenders (see Figure 14). Figure 14: Net lending (+)/net borrowing (-) by sector Source: Office for National Statistics Download chart XLS format

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Compared to the previous quarter, there has been a switch to net lending in the local government and financial corporations sectors. All other sectors remain unchanged. See table I for further detail. The household and non-profit institutions serving households (NPISH) sector (Tables J1, J2 and J3) Saving ratio: Annually for 2013 the saving ratio was 5.2%, compared with 7.3% in 2012. The saving ratio in Q1 2014 was 4.9%, compared with 4.8% in the previous quarter. This small increase was due to rises in gross operating surplus and mixed income and pension fund reserves offset by a fall in social benefits and a rise in final consumption expenditure (see Figure 15). Figure 15: Households' saving ratio Source: Office for National Statistics Download chart XLS format

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What is the saving ratio? The saving ratio estimates the amount of money households have available to save (known as gross saving) as a percentage of their total disposable income (known as total available households’ resources). Both can be found in table J3 of the Quarterly National Accounts (QNA) release. Gross saving estimates the difference between households’ total available resources (mainly wages received, revenue of the self-employed, social benefits and net income such as interest on savings and dividends from shares but excluding taxes on income and wealth) and their current consumption (expenditure on goods and services). All of the components that make up gross saving and total available resources, and in fact all sector accounts data apart from real household disposable income (RHDI), are estimated in current prices (CP). These are sometimes known as nominal prices, meaning that they include the effects of price changes. The saving ratio is published in both non-seasonally adjusted (NSA) and seasonally adjusted (SA) formats with the latter removing seasonal effects to allow comparisons over time. However, the saving ratio can be volatile and is sensitive to even relatively small movements to its components, particularly on a quarterly basis. This is because saving is a small difference between two numbers. It is therefore often revised at successive publications when new or updated data are included.

Real household disposable income: For the year 2013, real household disposable income decreased by 0.3% following a rise of 2.5% in 2012. This reflects an increase of 2.2% in the household and NPISH final consumption deflator, partially offset by a 2.0% rise in nominal gross disposable income. This increase in nominal gross disposable income was due to a rise in wages and salaries and social benefits, partially offset by increased taxes on income and wealth. The level of real household disposable income decreased by 0.2% in Q1 2014, following a fall of 0.7% in the previous quarter (see Figure 16). The decrease in the latest quarter was driven by a 0.4% rise in the household and NPISH final consumption deflator, partially offset by a 0.1% rise in nominal gross disposable income. Figure 16: Real households' disposable income, quarter-on-quarter growth Source: Office for National Statistics Download chart XLS format

(18.5 Kb) What is real household disposable income? There are two measures of household income, in real terms or in current prices (or nominal as it is often called), and both of these time series can be found in table J2 of this release.

Gross household disposable income (GDI) is the estimate of the total amount of money from income that households have available from wages received, revenue of the self-employed, social benefits and net income (such as interest on savings and dividends from shares) less taxes on income and wealth. All the components that make up GDI are estimated in current prices. However, by adjusting gross disposable income to remove the effects of inflation, we are able to estimate another useful measure of disposable income called real. This is a measure of real purchasing power of household incomes, in terms of the physical quantity of goods and services they would be able to purchase. We use the household expenditure deflator (which can be found in table J2 of this release) to remove the effects of price inflation.

Private non-financial corporations sector, tables K1 and K2 For the year 2013, net lending was £24.0 billion following net lending of £29.7 billion in 2012. This decrease was due to a fall in net property income, partially offset by a rise in gross operating surplus. Net lending of private non-financial corporations was £5.2 billion in Q1 2014, following net lending of £8.4 billion in the previous quarter. This decrease in net lending in the latest quarter was due to a fall in net property income of £5.3 billion.

International Comparisons for Q1 2014 In Q1 2014, GDP for the Eurozone and the European Union (EU 28) grew by 0.2% and 0.3% respectively quarter-on-quarter (see Table 2 and Figure 17). This is the fourth consecutive quarter both economies have grown. When compared to Q1 2013, GDP for the Eurozone expanded by 0.9%, while GDP for the European Union grew by 1.4% (see Figure 18). Following 0.7% quarterly growth in Q4 2013, GDP for the United States of America contracted by 0.2% in Q1 2014, the first time the economy has contracted since 2011. GDP for the United States of America grew by 2.0% between Q1 2013 and Q1 2014. The Japanese economy grew by 1.6% in Q1 2014, making five consecutive quarters of positive growth, and increased by 2.8% between Q1 2013 and Q1 2014. Table 2: International GDP quarterly growth rate comparisons for selected economic areas chained volume measure, seasonally adjusted EU28 Eurozone France Germany Japan United Kingdom United States of America Q1 2012 0.0 -0.1 0.2 0.7 1.0 0.0 0.9 Q2 2012 -0.2 -0.3 -0.3 -0.1 -0.6 -0.4 0.3 Q3 2012 0.0 -0.2 0.3 0.2 -0.8 0.8 0.7 Q4 2012 -0.4 -0.5 -0.3 -0.5 0.0 -0.2 0.0 Q1 2013 0.0 -0.2 0.0 0.0 1.3 0.4 0.3 Q2 2013 0.4 0.3 0.6 0.7 0.7 0.8 0.6 Q3 2013 0.3 0.1 -0.1 0.3 0.3 0.8 1.0 Q4 2013 0.4 0.3 0.2 0.4 0.1 0.7 0.7 Q1 2014 0.3 0.2 0.0 0.8 1.6 0.8 -0.2 Table source: Office for National Statistics Download table XLS format

(29 Kb) Figure 17: International GDP growth rates, quarter-on-quarter Source: Office for National Statistics Download chart XLS format

(23 Kb) Figure 18: International GDP growth rates, quarter on same quarter a year ago Source: Office for National Statistics Download chart XLS format

(22 Kb) Figure 19 shows GDP for the UK, EU, the United States of America and Japan, all indexed to Q1 2008 (the pre-downturn peak in the UK).

Figure 19: International GDP growth rates, quarter-on-quarter, indexed to Q1 2008=100 Source: Office for National Statistics Download chart XLS format

(20 Kb) More detailed information on these estimates can be found on the Eurostat website. Information on the estimates for the United States of America can be found on the Bureau of Economic Analysis website, while information on the estimates for Japan can be found on the Japanese Cabinet Office website.

Sector Accounts Revisions, Previously Published 28 March 2014 Sector accounts revisions are shown in Annex H (30.5 Kb Excel sheet) of this release.