We project that the output of the economy in the three months ending in September was 0.4% higher than in the previous three months. This shows below-trend growth for the first time since late last year and is the weakest out-turn since May of last year. The fall in the growth rate since the second quarter can be largely understood in terms of the fall in services output in July. While our model predicts a resumption of fairly rapid service sector growth in August and September, the impact of the July figure on the total is substantial.
If service sector output growth has resumed, then it is likely that the rolling quarterly growth rate from October to December will be above trend again. Our estimate of slow growth in the third quarter of the year reduces the chance that interest rates will be increased in November, although we continue to expect a further rise eventually.
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 0.14% 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 has been published in the February 2005 volume of the Economic Journal. That methodology has been revised to take use the ONS Index of Services which has now become a National Statistic. This revision ensures that full use is made of the official monthly data as they accrue.
For more information please telephone Martin Weale on 020 7654 1945
Contents of Press Release:
Table 1, Page 2: 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 3: Output by Sector (Industry, Agriculture, Construction, Private Services, Public Services, GDP(B) (calculated at prices excluding taxes and subsidies), GDP.
Table 3, Page 4: Output in Quarter Ending in Month Shown by sector (as above).
Table 4, Page 5: Growth in Quarter Ending in Month Shown over Previous Quarter (% at annual Rate) by sector (as above).