April 2008 GDP Estimates

Our latest estimate suggests that the growth rate in the three months ending in April is 0.4% after 0.4% in the three months to March. The results for both three-month periods are boosted by buoyant figures for February making it possible that slower growth could emerge in the three months ending in May. The Bank of England is obviously concerned about inflation because a failure to keep inflationary expectations in check would be very damaging. Nevertheless there is a case for a quarter-point reduction in the interest rate this month based on the prospect of slower economic growth. Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a standard error of 0.1-0.2% point when compared to the first estimate produced by the Office for National Statistics. This comparison can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this. A paper describing the methodology used to produce the data was published in the February 2005 volume of the Economic Journal. From April until October 2006 our estimates were computed using the Index of Services published by ONS. However this monthly series shows considerable volatility which has caused us some problems in estimating GDP. From our November 2006 press release we have therefore reverted to using a model of private services output based on indicator variables. This means that, while all our figures for calendar quarters are fully coherent with ONS data, our estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series. For more information please telephone Martin Weale on 020 7654 1945.