March 2011 GDP Estimates

Our monthly estimates of GDP suggest that output grew by 0.2 per cent in the three months ending in February after a fall of 0.2 per cent in the three months ending in January. Most of the effects of the adverse weather in December should have been unwound in the most recent data. The underlying quarterly growth rate of the economy remains below its trend and the output gap is likely to be widening.

The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2013.

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 and they are also likely to be less accurate in the current disturbed economic circumstances.

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 James Mitchell on 020 7654 1926.

Contents of Press Release

• Table 1, Page 3: Summary Table of Quarterly Growth Rates showing Monthly Data, 3 months ending in that month, and Quarterly Growth (% per quarter). All contain Figures for Industry & GDP.
• Table 2, Page 4: Output by Sector (Industry, Agriculture, Construction, Private Services, Public Services, GDP(B) (calculated at prices excluding taxes and subsidies), GDP
• Table 3, Page 5: Output in Quarter Ending in Month Shown by sector (as above)
• Table 4, Page 6: Growth in Quarter Ending in Month Shown over Previous Quarter (% at annual Rate) by sector (as above)