As September ended and brought with it a close to the third quarter of 2015, eyes were following the latest revision to the UK’s Q2 performance. The quarterly expansion or contraction data is an eagerly awaited index of the performance of an economy and is released as soon as sufficient data has been collected. In the UK, as in most other developed economies, GDP figures are provided as three data sets: preliminary, secondary and final. The preliminary estimate is based on approximately 44% of the complete data set and emerges 25 days after the end of the quarter; the secondary estimate comprises 80% of the data and is released about seven weeks after the end of the quarter in question; the final data set is released towards the end of the following quarter (90 days) and is based on 91% of the comprehensive data. This implies a final re-evaluation of the quarterly data is required and this is given in the annual “Blue book” report after adjustment for other factors. This explains why GDP figures for a given quarter are subject to change.
That may be a long-winded introduction to the statement that the Office for National Statistics has revised its Q2 2017 figure downwards, but now you know why! ONS released a final Q2 figure for UK GDP of 1.5%, trimming the secondary estimate down by 0.2% (note that this is the annualised year-on-year growth as recorded in the Blue book). The estimate for Q2 GDP (2017) remained unchanged as a 0.3% growth over Q1.
The annualised figure is the weakest year-on-year growth seen since 2013; it will be seen as evidence that the effect of the 2016 Brexit decision is beginning to manifest itself on the economy.
There is pressure on the Bank of England to raise interest rates in a bid to choke off inflationary pressure. However, increasing borrowing costs would normally be expected to dampen down economic growth with a potential to trigger a rise in unemployment. However, with interest rates at an historic low, the Bank may be considering that business will be able to absorb such a shock.
