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ONS Economic Forum Email: [email protected] Twitter: @ONS #ONSeconomy Website: http://www.ons.gov.uk/ons/about-ons/getinvolved/events/events/economic-forum/index.html 15 January 2015 1 What’s new Peter Patterson, Deputy Chief Economic Adviser ONS Economic Forum 15 January 2015 2 What’s new - outline • Latest ONS economic statistics, including quarterly national accounts • New quarterly release on indicators of economic well-being • NA measure of living standards - relationship between RHDI and GDP growth • Variations in the inflation experience of UK households 3 Sharp fall in inflation to 0.5%, record low % changes on a year earlier 7 6 5 4 3 2 1 0 -1 CPI all items CPI goods -2 CPI services -3 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN JAN 4 GDP growth stabilised in 2.5-3% annual range during past year % changes on same quarter of previous year 3.5 QNA 3.0 Second Estimate 2.5 2.0 1.5 1.0 0.5 0.0 2010 Q2 Q1 Q3 Q4 2011 Q2 Q1 Q3 Q4 2012 Q2 Q1 Q3 Q4 2013 Q2 Q1 Q3 Q4 2014 Q2 Q1 Q3 5 Revisions to three measures of GDP Revisions to year-on-year growth rates of different estimates of GDP, percentage points 0.4 0.2 0 -0.2 Expenditure -0.4 Income -0.6 Output -0.8 Average -1 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 6 Mean revisions to GDP growth estimates Percentage points 4 time intervals: M5_P 5 mths Y1_P 1 year Y2_P 2 years Y3_P 3 years Source: OECD 7 Services maintain the momentum of growth Index nos, 2011=100 110 105 100 95 Services Production 90 Construction Manufacturing 85 2011 JAN 2011 JUL 2012 JAN 2012 JUL 2013 JAN 2013 JUL 2014 JAN More than half of growth in services output (or 70% of cumulative GDP growth) since 2011 is due to 3 sectors: •Other professional service activities •Admin & support service activities •Real estate activities 2014 JUL 8 Sectoral financial balances Net lending/borrowing by sector, % of GDP 8 6 4 2 0 -2 -4 -6 Public sector -8 Households Companies -10 Overseas -12 -14 1997 Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 9 UK current account deficit % of nominal GDP 8 6 4 2 0 -2 -4 -6 -8 -10 -12 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total secondary income balance Total primary income balance Trade in goods balance Current account balance Trade in services balance 10 Primary income balance % of GDP 5.0 4.0 3.0 2.0 Earnings on debt securities Earnings on equity securities Direct investment 1.0 Other investment 0.0 Other primary income -1.0 -2.0 Total primary income balance -3.0 -4.0 1997 Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 11 Economic Well-being Q3 2014 • Traditional measures of progress such as GDP are increasingly considered an incomplete picture of the state of the nation. • First of regular quarterly bulletins to coincide with QNA. • Economic Well-being provides a fuller understanding of the economy & how it impacts on national well-being • To give a more rounded and comprehensive basis for assessing changes in material well-being 12 GDP, GDP per head and NNDI per head Q1 2000 = 100 135.00 130.00 125.00 120.00 115.00 110.00 Gross Domestic Product (GDP) 105.00 GDP per head 100.00 Real Net National Disposable Income (RNNDI) per head 95.00 90.00 2000 Q1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 13 GDP and household income per head 2000 Q1 =100 125 120 115 110 105 GDP per head RHDI per head 100 95 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 14 Cumulative contributions to growth since 2007 – GDP and RHDI Percentage points 40 Percentage points 40 GDP RHDI GDP = £1,618bn in 2011 RHDI = £1,068bn in 2011 30 30 20 20 10 10 0 0 -10 -10 -20 -20 -30 -30 2007 2008 2009 2010 2011 2012 2013 Inflation Taxes on Products and Production Other Income Gross Operating Surplus Compensation of Employees GDP 2014 2007 2008 2009 2010 Inflation Net Social Benefits Net social contributions Gross Operating Surplus RHDI 2011 2012 2013 2014 Other Taxes Net property income 15 Compensation of Employees Variation in the inflation experience of UK households • Developed alongside the Johnson Review, this paper is one response to their second recommendation: the regular publication of inflation indices for sub-groups in the UK • Uses micro-level expenditure data and detailed price indices to estimate inflation rates for: o Expenditure and income deciles o Households with and without children o Retired and non-retired households • Published 15th December 2014, it is the first UK paper to do this on a CPI consistent basis • Full methodology and supporting documents available online, headline results presented here 16 Lower income households have experienced higher inflation rates ... Note: 1= lowest income, 10= highest income 17 ... as have lower expenditure households Note: 1= lowest expenditure, 10= highest expenditure 18 Retired households have experienced higher price increases than non-retired households... 19 ... mostly because of Energy & Fuel costs 20 Headline results, average inflation 2003 - 2013 % Inflation Group Decile of 1 2 9 10 Disposable Income 2.9 2.7 2.5 2.6 Expenditure 3.7 3.3 2.3 2.3 Households with Children 2.4 Households without Children 2.7 Retired Households 2.8 Non-Retired Households 2.5 CPI 2.6 21