Our latest estimate suggests that the growth rate in the third quarter of the year was 0.7%, slightly slower than the second quarter figure of 0.8%. We expect this to presage a further slowdown into next year. A study last month by NIESR as part of the Euroframe Group pointed to a growth rate of 2.2% next year, but this may be revised in our quarterly forecast to be produced at the end of October. While we have expressed the view that the last interest rate increase was unnecessary, the Bank of England is likely to wait for clearer evidence of a slowing economy before reversing it.
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 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 Simon Kirby on 020 7654 1916.
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)