Download Slide 1

UK Economic Situation
April – June 2012
(Quarter 2 of 2012 or 2012 Q2)
The third revision of figures
GDP and Sector Accounts
Key Figures
• GDP growth for Q2 revised up to -0.4% from -0.5%
(Note “GDP growth for Q2” means how GDP changed between Q1
and Q2 of 2012)
•
•
•
•
•
Production -0.7%, Construction -3.0%, Services -0.1%
GDP growth for 2011 = 0.9%
Household final consumption expenditure -0.2%
Household saving ratio 6.7% in 2012 Q2
Real household disposable income growth +1.9% in
2012 Q2
Balance of payments
• Current account deficit widened to £20.8
billion in 2012 Q2 (£15.4 billion in 2012 Q1),
the highest on record and the highest as a
percentage of GDP at 5.4%
• Driven by:
• £3.2 billion increase in the income deficit to
£5.2 billion in 2012 Q2, due to an increase in
the deficit in investment income
• £2.0 billion increase in the trade deficit to
£10.1 billion in 2012 Q2, due to an increase in
the deficit in trade in goods
GDP Revisions for Q2 2012
Release
GDP growth rate
Data content
Information
released
Month 1
-0.7%
44%
GDP(Output)
Month 2
-0.5%
83%
GDP(Output),
GDP(Income) and
GDP(Expenditure)
Month 3
-0.4%
92%
GDP(O), GDP(I)
and GDP(E), and
additional
information.....
GDP Growth and ‘Special Events’
Try to guess the
“special events” that
affected or are likely
to affect GDP growth
£357,324bn
£357,477bn
Government spending and GDP(E)
Households
Government
NPISH
GFCF
Trade
So how would the GDP figures
be affected if the government
suddenly stopped spending?
New Information at Month Three (1)
Can you describe and
explain this graph?
New information (2)
What can you say about the graph
before and after the 08/09 recession?
Office for Budget Responsibility
What kind of forecasts do you think this
Growth Forecast
office would give? Optimistic?
Pessimistic?
Now seeing the forecasts, do you think they are
optimistic or pessimistic about UK GDP growth?
Why do you think this is called the “Productivity Puzzle”?
The ‘Productivity Puzzle/GDP Conundrum/Paradox’
Pre-recession
Employment is nearly back to it’s 2008 level . . .
. . . but GDP is not
See Notes
Change in the Type of Employment
One way to
explain the puzzle:
Part time
employment has
been rising.
Try to outline why this helps
explain the productivity
puzzle/GDP conundrum.
An Increase in Underemployment
What do you think
underemployment and
overemployment are?
(See notes)
Another way to explain
the puzzle:
Underemployment has
been rising and Over
employment falling.
Try to outline why this helps
explain the productivity
puzzle/GDP conundrum.
Conclusions
The contraction of GDP has been revised upward but this doesn’t
change the economic picture
Government expenditure has held up the economy
Improvement in disposable income, providing much needed relief to
households.
OBR growth forecast looks optimistic given Q2 GDP figures
Labour market more resilient than output  the “Productivity Puzzle”