Tuesday, October 26, 2010

GDP Growth Announcement

Every three months or so, the Office for National Statistics releases the numbers for Gross Domestic Product (GDP) for the previous quarter (three month period). Today it released its first estimate of what GDP was for the UK in 2010Q3 (the third quarter of 2010) which is based on about a quarter of all the information available to them.

Next term we'll talk quite a bit about GDP but the BBC's economics section has quite a nice description of it if you're not familiar.

In 2010Q2 the UK economy grew by 1.2% which was surprisingly high, but it is often the case that as an economy starts to emerge from a recession that it grows strongly. Growth in 2010Q3 was expected to be much slower with many pundits expecting about 0.4%. Today though that number came in at 0.8%. It means that for 2010 as a whole, growth is likely to be just shy of 2%.

Does this mean the economy is up and running and all is well? As the BBC article makes clear however, there are other reasons to be a little bit pessimistic about future growth: Retail sales fell in September, and house prices are falling (these are seen as a barometer of economic activity). Furthermore, the impact of the Coalition government's steep spending cuts will start to take effect soon, something else that is likely to depress future growth.

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