Wednesday, May 26, 2010

Growth Revised Up

In the last week, the Office for National Statistics (ONS) has announced that GDP growth for 2010Q1 has been revised up from 0.2% to 0.3%. May not sound like a big deal but when GDP is in the order of billions, 0.3% of a billion is a substantial number.

What are these updates? Are they the outcomes of different measures of GDP? The answer is no: They are simply the ONS getting closer to the right number.

There's great clamour in our 24-hour news, instant gratification culture to get our hands on the numbers as soon as possible, and the ONS responds to that by announcing GDP as early as possible after the quarter has ended (at the end of March in this case). That comes (I think!) 40 days after the end of the quarter, and the first revision 60 days.

The initial number comes after only a supposedly representative portion of the economy has been added up, and of course over time more of the economy's (recorded) activity is added up. For 2009Q4, the first announcement was 0.2% growth, the first revision up to 0.3%, the last revision to 0.4%. Perhaps the first segment the ONS counts isn't so representative after all.

It should also be noted that it's a quarterly figure, not an annual one. The growth is based on the same quarterly figure for the previous year however (to avoid the fact that production post-Christmas for example will always fall).

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