GDP quarterly national accounts, UK: April to June 2022

• UK gross domestic product (GDP) is estimated to have increased by 0.2% in Quarter 2 (Apr to June) 2022, upwardly revised from a first estimate contraction of 0.1%.
• Services output are estimated to have increased by 0.2% in Quarter 2 2022, reflecting an easing in information and communication, and professional, scientific and technical activities output; there was also continued weakness in the wholesale and retail trade, and health industries.
• Estimates show that UK GDP contracted by a downwardly revised 11.0% in 2020, reflecting the effects of coronavirus (COVID-19) restrictions, while UK GDP is now estimated to have expanded by an upwardly revised 7.5% in 2021.
• The level of real GDP is now estimated to be 0.2% below where it was pre-coronavirus at Quarter 4 (Oct to Dec) 2019, downwardly revised from previous estimates of 0.6% above.
• The implied GDP deflator rose by 5.2% in the year to Quarter 2 2022, primarily driven by an 8.2% increase in the implied price of household consumption; there was a 6.0% rise in the implied price of imports, including the effects of higher gas prices over the quarter.
• While falling to 7.6% in Quarter 2 2022, our Blue Book 2022-consistent saving ratio suggests that households have saved more of their incomes during and after the coronavirus pandemic than we previously estimated.
• This release contains data that are consistent with the UK National Accounts: Blue Book 2022, which will be released on 31 October 2022, and, as such, data for all periods within this release are subject to revision in line with the National Accounts Revision Policy; further detail on these changes is available in Section 6: Revisions to GDP.

UK gross domestic product (GDP) is estimated to have increased by 0.2% in Quarter 2 (Apr to June) 2022, revised up from a first quarterly estimate of a 0.1% fall. Nominal GDP rose by an upwardly revised 1.4% in Quarter 2 2022, from a first quarterly estimate of 1.1%. An indicative monthly real GDP path consistent with these quarterly figures can be found in the associated dataset.

UK GDP is now estimated to have contracted by 11.0% in 2020, revised from the previous estimate of a fall of 9.3%. In 2021, UK GDP is estimated to have expanded by an upwardly revised 7.5%, compared with an initial estimate for a rise of 7.4%.

The level of real quarterly GDP in the UK is now 0.2% below its pre-coronavirus (COVID-19) pandemic level in Quarter 4 (Oct to Dec) 2019 (Figure 2). This has been revised from the previous estimate of being 0.6% above its Quarter 4 2019 level. Compared with the same quarter a year ago, the level of real GDP rose by 4.4% in Quarter 2 2022.

Compared with the same quarter a year ago, the implied GDP deflator rose by 5.2%. This was primarily driven by an 8.2% increase in the implied price of household consumption, reflecting the inflationary pressures in consumer prices.

In this publication, we improved the price measurement of gas imports within our trade figures. As an increase in import prices contributes negatively to the implied GDP deflator, the rise in the implied price of household consumption was partially offset by higher import prices over the year. This reflected higher oil and gas import prices over this period.

This implied GDP deflator represents the broadest measure of inflation in the domestic economy, reflecting changes in the price of all goods and services that comprise GDP. It is important to note that the GDP deflator covers the whole of the economy, not just consumer spending. Movements in the implied GDP deflator in 2020, 2021 and 2022 have been largely affected by the government consumption deflator, which is the expenditure that is incurred by government in producing non-market goods and services, such as health and education. The volume of government activity fell while at the same time government expenditure increased in nominal terms. This reflects how we record volume estimates of health and education as explained in our blog, Public services: measuring the part they play in the economy through the pandemic.

International comparisons

In real terms, the UK is the only G7 economy yet to recover above its pre-coronavirus pandemic level in Quarter 4 2019. Our recent article on the Impact of Blue Book 2022 noted that the UK, France and the United States are the only countries in the G7 to have estimated the economic effect of the coronavirus pandemic in 2020 through the Supply and Use Tables (SUT) framework, which looks at the supply of goods and services on a very detailed level, how they are used in the economy, and their associated prices.

Previous analysis highlights the challenges of making international comparisons of GDP and notes it is useful to compare nominal and real estimates of GDP.

In Quarter 2 (Apr to June) 2022, output rose by 0.2%, upwardly revised from the first quarterly estimate of a 0.1% fall. There were increases in services and construction output, while production output fell. Services output is now a revised 0.9% below Quarter 4 (Oct to Dec) 2019 levels, while production output is now 5.2% above those pre-coronavirus (COVID-19) pandemic levels. Construction output is now 3.2% above pre-pandemic levels.

Services

There was a slowing in services output from 0.8% in Quarter 1 (Jan to Mar) 2022 to 0.2% in Quarter 2 2022, underpinned by an easing in information and communication, and professional, scientific and technical activities output. There was also continued weakness in the output produced by the wholesale and retail trade, and health industries.

The quarterly change in services output in Quarter 2 2022 has been upwardly revised from a first quarterly estimate of a 0.4% fall. The revised estimates were driven by positive contributions from human health and social work activities; financial and insurance service activities; and professional, scientific, and technical activities (Figure 6). There were partially offsetting negative revisions to other service activities, wholesale and retail trade, and accommodation and food services.

Figure 5 shows that there have been revisions to the cumulative output produced by industries relative to Quarter 4 2019 levels. These include a weaker position for wholesale and retail; transportation and storage; and health industries, while there is a stronger position for the arts, entertainment and recreation; and finance industries. The relative impact on "high-contact" industries and "low-contact" industries is still similar, although these revised estimates show that there has been less of a recovery in these “high-contact” industries than previously estimated. We plan to publish additional detailed analysis on these specific industries in October 2022 alongside Blue Book 2022.

Human health and social work activities saw large downward revisions over the course of 2020, following alignment to gross value added (GVA) from the Supply and Use Tables (SUTs) framework, as explained in our Impact of Blue Book 2022 changes on gross domestic product release. The use of GVA reflects the increase in intermediate consumption (IC) in 2020 in the health industry, following additional spending on personal protective equipment (PPE), NHS Test and Trace, and increased use of agency staff.

Output data for years that have not yet gone through the SUT process are usually created using the short-term measures of output only as a proxy for GVA, therefore assuming that the IC ratio holds constant from the last SUT balanced period. To better account for future changes in the ratio between intermediate consumption and output in the human health activity industry, government-based estimates for GVA are now being utilised to construct estimates of GVA data for 2021, as published in our methodological improvements article. This improvement has led to upward revisions over the course of 2021, better reflecting the rise in activity such as Test and Trace and non-COVID-19 health activity and the increase in face-to-face appointments at GP surgeries.

In Quarter 2 2022, there was an upwardly revised fall of 3.5% in human health and social work activities, from a first quarterly estimate of a 5.4% fall. This is now 10.0% below its pre-coronavirus pandemic levels. There was an upwardly revised growth of 0.5% in financial and insurance activities, driven by changes to the measurement of insurance and pensions. This is now 4.8% above its pre-coronavirus levels.

Production

Production output saw a downwardly revised fall of 0.2% in Quarter 2 2022 from an increase of 0.5% at first quarterly estimate. This was driven by a 1.1% fall in manufacturing output, particularly in the manufacture of computer, electronic and optical products; manufacture of chemicals and chemical products; and manufacture of rubber and plastics products, and other non-metallic minerals. Anecdotal evidence from the Monthly Business Survey suggested that higher prices of energy and materials may be starting to affect the manufacture of chemicals and chemical products.

There were downwards revisions to manufacture of transport equipment, driven by large revisions to manufacture of motor vehicles, trailers and semi-trailers from updated survey responses. Anecdotal evidence from the Society of Motor Manufacturers and Traders (SMMT) indicated that ongoing shortages of key components led to car production in the first half of 2022 being weaker than 2009 when the global financial crisis affected demand.

There was a 1.0% fall in mining and quarrying output in Quarter 2 2022. There was a 3.9% increase in electricity, gas, steam, and air conditioning supply, primarily driven by increases in the gas industry.

Relative to pre-coronavirus levels, manufacturing is now 4.7% above Quarter 4 2019 levels, upwardly revised from 0.1% below. Mining and quarrying is the only production industry that remains below Quarter 4 2019 levels, with electricity, gas, steam, and air; and water supply and sewerage output now 3.6% and 19.6% above pre-coronavirus levels, respectively.

Construction

Construction output rose by 1.1% in Quarter 2 2022, revised down from a first quarterly estimate of 2.3%. Seven of the nine construction sectors saw an increase in Quarter 2 2022, primarily driven by new work, and repair and maintenance. Meanwhile, recent new orders in the construction industry data show a 10.4% fall in the latest quarter. Anecdotal evidence from the Monthly Business Survey for Construction and Allied Trades (MBS) and the Business Insights and Conditions Survey (BICS) highlights increased costs of construction products and the cost-of-living crisis as drivers for the contraction seen in demand.

Expenditure gross domestic product (GDP) rose by 0.2% in Quarter 2 (Apr to June) 2022, upwardly revised from a first quarterly estimate of a 0.1% fall. Real household expenditure rose by 0.1% in Quarter 2 2022, upwardly revised from a 0.2% contraction, while real gross fixed capital formation fell by 1.4% in the quarter, downwardly revised from a 0.6% growth. Real government consumption expenditure fell by 1.5% in Quarter 2 2022, upwardly revised from a 2.9% fall. Figure 8 shows that household consumption is now estimated to be 2.7% below its pre-coronavirus (COVID-19) pandemic level, while government expenditure is 3.3% above. Gross fixed capital formation is now 1.7% below its Quarter 4 (Oct to Dec) 2019 level.

There have been some large gross trade flows in the first half of 2022, particularly in imports. However, there is some additional uncertainty on EU trade flows because of recent changes in how some of these data are collected. For more information, please refer to the trade section of this release and our recent blog, Understanding the latest changes to UK trade figures with the EU.

We previously referred to practical challenges in balancing GDP during the coronavirus pandemic and, in Quarter 2 2022, there have been challenges in balancing the expenditure approach to GDP. In line with our previous approach and as at the first quarterly estimate for Quarter 2 2022, rather than force a GDP balance for expenditure by heavily adjusting the expenditure components, we have decided to show the best estimate of each underlying component at this stage. For further information, please refer to the “Gross capital formation” subheading in this section and Section 10: Measuring the data.

Private consumption

There was a slowing in growth in household consumption expenditure in the second quarter of 2022. Real household expenditure rose by an upwardly revised 0.1%, following an unrevised Quarter 1 (Jan to Mar) 2022 growth of 0.6%. This quarterly increase was driven by rises in spending on transport, health, and restaurants and hotels. These were partially offset by falls in net tourism and clothing and footwear.

There were revisions to real household expenditure as outlined in our Impact of Blue Book 2022 changes on gross domestic product release. These improvements reflect changes to the measurement of insurance and pensions and new data sources being taken on for the first time. Real household expenditure is now 2.7% below its pre-coronavirus pandemic level, downwardly revised from the previously published 0.6% below.

There was an upward revision to nominal household consumption expenditure. This is now estimated to have increased by 3.2% on the quarter, revised up from the first estimate of 2.6%. There are revised nominal estimates of spending on financial services, in particular financial intermediation services indirectly measured (FISIM). This is the implied charge by financial intermediaries on loans and deposits. The revisions reflect incorporating the recent tightening in financial conditions on this implied charge.

Consumption of government goods and services

Real government consumption expenditure fell by a revised 1.5% in Quarter 2 2022. The fall was driven by central government, primarily because of declines in healthcare consumption. This reflects decreases in coronavirus-related activities such as Test and Trace, lateral flow devices and vaccinations.

There were downward revisions to health expenditure because of the implementation of a new methodology to estimate GP services, consistent with that used in our public service productivity series, and updated coronavirus-related activity data. Most notably there have been updates made to the cost weights used to combine volume changes in different COVID-19 testing activities. In our previous approach, COVID-19 testing was measured using two components to distinguish lateral flow devices (LFDs) from laboratory-processed tests. We now have data that enable us to measure these activities more accurately. The most consequential change is splitting LFDs into tests that are self-administered and tests that are administered by healthcare professionals. This has reduced the contribution of LFD testing relative to other services and has led to a downwards revision in the quarterly testing volume data.

There was a revised 4.6% fall in government nominal expenditure in Quarter 2 2022, driven by a decrease in central government expenditure. This reflects downward revisions to health and education expenditure data.

Gross capital formation

Real gross fixed capital formation fell by 1.4% in Quarter 2 2022, revised downwards from the first quarterly estimate of 0.6%. This was driven by the revised 21.5% fall in government investment in the second quarter, reflecting updated government estimates that better capture a slowdown in public sector acquisition and maintenance of existing buildings.

Business investment increased by 3.7% in Quarter 2 2022, driven by rises in transport. While there is no impact on the GDP aggregates, some of the lower-level gross fixed capital formation detail that normally accompanies the business investment release is unavailable at this stage. Further information is available in the Business investment in the UK: April to June 2022 provisional results bulletin.

Note that balancing and alignment adjustments are typically applied to the inventories component to help balance the expenditure approach to average gross domestic product.

For Quarter 1 and Quarter 2 2022, the alignment adjustment is larger than normal (Table 2). This is as a result of challenges in balancing GDP; therefore, we have decided to show the current best estimate of each underlying component of expenditure rather than force a balance. More detail can be found in Section 10: Measuring the data.

Excluding the alignment adjustment, there was a £7.3 billion increase in inventories in Quarter 2 2022. There were upward revisions in industries because of updated survey data in the latest quarter.

Net trade

Our trade estimates are primarily based on data collected by HM Revenue and Customs (HMRC). A recent HMRC data collection change affected our EU to Great Britain import and export statistics. We are considering possible options to account for this discontinuity. We continue to advise caution in interpreting movements across periods, as outlined in our latest UK trade bulletin. For more information, please see Section 10: Measuring the data.

As previously communicated, this quarter we have introduced two methodological improvements to UK trade estimates; these relate to deflation of gas imports (trade in goods) and estimates of travel services because of methodological improvements to the International Passenger Survey (IPS). The implementation of a new gas deflator has contributed downward revisions to real trade imports from 2021 onwards, whereas the IPS update has increased the nominal levels of both imports and exports of travel services back to 2009.

There was a narrowing in the UK's trade deficit for goods and services, which was 4.2% of nominal GDP in Quarter 2 2022 (Figure 10), following a Quarter 1 2022 deficit of 5.4%. Excluding non-monetary gold, the trade deficit was 4.0% in Quarter 2 2022. There have been large price movements in these trade flows, particularly reflecting oil and commodity price movements.

Total import volumes fell by a revised 1.5% in Quarter 2 2022. There was a 1.2% increase in real imports of services, driven by growth in transport services, while the fall in imports of goods (2.4%) was driven by unspecified goods and fuels. Total export volumes rose by a revised 3.6% in the latest quarter. The 5.8% rise in export goods was driven by machinery and transport equipment, chemicals, and materials manufacturers. The 1.4% rise in exports services was driven by travel, transport, and financial services.

Nominal gross domestic product (GDP) rose by 1.4% in Quarter 2 (Apr to June) 2022, revised from the previous estimate of 1.1%. Nominal GDP is now 9.1% above its pre-coronavirus (COVID-19) pandemic levels.

Compensation of employees (CoE) rose by 1.2% in Quarter 2 2022, revised upwards from 0.7%. The quarterly increase was driven by a revised rise in employers' contributions (3.5%) and wages and salaries (0.7%). The upward revision to CoE is because of revised His Majesty's Revenue and Customs (HMRC) data and updated labour market estimates. Compared with the same quarter a year ago, CoE grew by 7.2%, down from a 8.6% growth at Quarter 1 (Jan to Mar) 2022.

Taxes less subsidies rose in Quarter 2 2022 by a revised 3.9%. There were downward revisions to taxes driven by revised value added tax (VAT) and other taxes on products data. Subsidies saw upward revisions driven by updated housing equity injection estimates.

The gross operating surplus (GOS) of private non-financial corporations (PNFC) increased by a upwardly revised 0.6% in the second quarter, which partly reflects better capturing the effects of higher energy prices for the oil industry. Excluding the alignment adjustment, PNFC GOS fell by 0.6% in Quarter 2 2022. There was also a 2.3% increase in financial corporations' GOS, and a 2.5% rise in households' GOS on the quarter. These include the effects of the revised financial intermediation services indirectly measured (FISIM) estimates that better capture the effects of the recent tightening in financial conditions, as well as the implementation of better measurement of the insurance and pension sector.

Note that alignment and balancing adjustments are typically applied to the GOS component to help balance the different approaches to GDP. We previously referred to practical challenges in balancing GDP during the coronavirus pandemic. This in part reflects large government interventions in response to the pandemic in areas such as employment costs via the CJRS subsidy to businesses and the SEISS payment to the self-employed. These schemes, alongside various business grants, tax deferrals and the VAT rate cut for the hospitality sector, have all made the measurement of income more challenging across 2020 and 2021.

This release includes revisions to the entire time series as part of Blue Book 2022, which will be released on 31 October 2022. Initial analysis on the impact of the methodological changes in Blue Book 2022 as well as the impact of balancing 2020 through the supply use process for the first time has been published. Alongside this, analysis of the impact of Blue Book 2022 on the sector and financial accounts was published on 12 September 2022.

As previously communicated, the reference year for this publication remains at 2019, and will continue to do so until Blue Book 2023.

In line with our National Accounts Revisions Policy, all periods up to Quarter 2 (Apr to June) 2022 in this release are open to revision. These revisions not only incorporate the Blue Book 2022 methodological changes but also improved source data and additional updated data as would happen in all quarterly national accounts releases. This includes new value added tax (VAT) turnover data for Quarter 4 (Oct to Dec) 2021 and Quarter 1 (Jan to Mar) 2022. This will also be reflected in the October 2022 monthly GDP estimates.

Estimates published for the first time today, 30 September 2022, are consistent with several methodological improvements to the institutional sector accounts introduced as part of our annual improvement programme. Indicative impacts of changes to the main financial and non-financial accounts estimates were discussed in our annual article published on 12 September 2022.

Non-financial account net lending and borrowing (seasonally adjusted)

In the non-financial account, the UK’s borrowing position with the rest of the world was 5.6% as a percentage of gross domestic product (GDP) in Quarter 2 (Apr to June) 2022, down from borrowing equivalent to 7.3% of GDP in Quarter 1 (Jan to Mar) 2022.

Looking at the UK’s largest domestic sectors:

• households saw a decrease in their net lending position to 1.4% as a percentage of GDP in Quarter 2 2022, down from 1.8% of GDP in the previous quarter, primarily reflecting increased expenditure on transport, restaurants and hotels, gas and electricity, miscellaneous goods, and food and drink
• general government has reduced its net borrowing position to 4.9% as a percentage of GDP in Quarter 2 2022 from 6.7% in Quarter 1 2022, primarily reflecting a drop in health expenditure
• non-financial corporations decreased their net borrowing position to 1.9% as a percentage of GDP in the quarter from 2.1% in Quarter 1 2022, primarily reflecting lower dividend payments paid out by UK businesses
• financial corporations decreased their net borrowing position to 0.1% as a percentage of GDP in the quarter from 0.5% in Quarter 1 2022, primarily reflecting a lower acquisition of valuables, especially non-monetary gold

Financial account net lending and borrowing (not seasonally adjusted)

• Households increased their net lending to £26.4 billion in Quarter 2 2022, following a net lending position of £4.9 billion in Quarter 1 2022; this was driven by a rise in deposits with UK banks and building societies of £10.5 billion.
• General government increased their net borrowing position to £46.2 billion in Quarter 2 2022, following a net borrowing position of £12.0 billion in Quarter 1 2022; this was driven by an increase in UK central government securities issued of £65.7 billion.
• Non-financial corporations increased their net lending position to £17.8 billion in Quarter 2 2022, following a net lending position of £14.4 billion in Quarter 1 2022; this was driven by decreased liabilities in long-term loans (excluding direct investment loans) of £38.6 billion.
• Financial corporations decreased their net borrowing position to £10.5 billion in Quarter 2 2022, following a net borrowing position of £21.2 billion in Quarter 1 2022; this was driven by the increased acquisition of shares issued by rest of the world institutions of £75.1 billion.

Spotlight on the household sector

Our annual methodological improvements introduced this quarter have changed our understanding of the amount households are saving and how household real incomes are decreasing over recent quarters.

Figure 12 shows how the household saving ratio since 2010 now looks in comparison with our previous estimates.

Between 1997 and 2019, the household saving ratio has been revised by an average of negative 0.2 percentage points annually. However, since Quarter 2 2020, the ratio has seen a shift upwards, suggesting that households are saving more of their income than we previously thought. The saving ratio peaked at 26.8% in Quarter 2 2020, meaning that over a quarter of total household income was saved as lockdowns restricted opportunities to spend.

From the third quarter of 2020 to the latest quarter, we have seen an average of a 1.7 percentage point upward revision to the quarterly saving ratio. Our latest estimates now show that household saving remains well above the level seen in Quarter 4 (Oct to Dec) 2019, the last full quarter not affected by coronavirus (COVID-19) restrictions, at 7.6% in Quarter 2 2022 compared with 5.6% in Quarter 4 2019.

As shown in Figure 13, driving this shift in the level of the saving ratio has been slower growth in nominal household consumption, when compared with the level of spending seen in Quarter 4 2019, and when measured against the growth seen in nominal incomes over the same period. This contrasts with the more consistent growth of both household income and expenditure seen in the period immediately prior to the coronavirus pandemic and in our previously published data, where estimates indicated household incomes and expenditure began converging from Quarter 3 (July to Sept) 2021.

Figure 14 shows that several spending categories have contributed to the lower comparable growth in household expenditure since Quarter 4 2019, once the impact of inflation has been removed.

Total expenditure, including UK resident spending overseas and overseas resident spending in the UK, has fallen 2.7% in volume terms since Quarter 4 2019, with drops in expenditure on motor cars and air transport, and the amount UK households are spending overseas and on personal care products, contributing the most to this drop in the volume of household consumption. Offsetting this have been relative increases in the volume of spending on restaurants and hotels, housing and related costs, and furniture and household equipment.

Despite household saving remaining higher than before the pandemic, real household disposable income (RHDI) fell by 1.2% in Quarter 2 2022. Nominal household gross disposable income grew by 1.8% but was offset by quarterly household inflation of 3.1%; this is the largest quarterly growth in household inflation since Quarter 4 1981, when it was 3.2%.

Using our new methods, this is now the fourth consecutive quarter of real negative growth in disposable income. Driving the rise in household expenditure this quarter were increases in costs of electricity and gas, and price increases in restaurants and cafes.

More data relating to the sector and financial accounts can be found in our Quarterly sector accounts, UK: April to June 2022 bulletin.

Contribution to growth

Contribution to growth indicates how many percentage points a sector or industry is adding or removing from a given growth rate, usually headline gross domestic product (GDP) growth.

Chained volume measure

Data in chained volume measures (CVM) within this bulletin have had the effect of price changes removed (in other words, the data are deflated), except for income data, which are only available in current prices.

Gross domestic product (GDP)

A measure of the economic activity produced by a country or region. GDP growth is the main indicator of economic performance. There are three approaches used to measure GDP:

• the output approach
• the expenditure approach
• the income approach

Index numbers

Data relative to a given base value, which typically refers to a particular year or quarter.

Household total resources

This includes income available to households such as wages and salaries, income from self-employment and unincorporated enterprises, income from pensions and other social benefits, and income from financial investments (less any payments of tax, social insurance contributions, and interest on financial liabilities). An adjustment for the change in pension entitlements is also included.

Household final consumption expenditure – national concept

This includes all consumption expenditure on goods and services in the UK and abroad by UK resident households and excludes expenditure by foreign residents in the UK.

Household final consumption expenditure – domestic concept

This includes all consumption expenditure on goods and services in the UK (by both foreign and domestic residents), but expenditure by UK residents abroad is not included.

For further definitions, please see the Glossary of economic terms.

Reaching the GDP balance

The different data content and quality of the three approaches – the output approach, the expenditure approach and the income approach – dictate the approach taken in balancing quarterly data. In the UK, there are more data available on output in the short term than in either of the other two approaches. However, to obtain the best estimate of gross domestic product (GDP) (the published figure), the estimates from all three approaches are balanced to produce an average, except in the latest two quarters where the output data take the lead because of the larger data content.

Because of quarterly GDP being a balanced measure of the three approaches and the output approach focusing solely on growth in gross value added (GVA) and output as a proxy for GDP, there is a difference in data (in both levels and growths terms) between the quarterly publications (average GDP) and the GDP monthly estimate (output approach to GDP). Quarterly GDP is the lead measure of GDP because of its higher data content and inclusion of variables, which enable the conversion from a GVA concept to a GDP basis.

Information on the methods we use for Balancing the output, income and expenditure approaches to measuring GDP is available.

Alignment adjustments, found in Table M of the GDP quarterly national accounts data tables, have a target limit of plus or minus £3,000 million on any quarter. However, in periods where the data sources are particularly difficult to balance, larger alignment adjustments are sometimes needed as explained in our recent article, Recent challenges of balancing the three approaches of GDP.

In this quarter, the alignment adjustment, used to align expenditure to average GDP, is larger than normal (Table 2). This approach preserves the component-level movements and shows the level of challenge and uncertainty currently within the expenditure approach to GDP. Work will continue with a focus on the expenditure approach to GDP, and we will continue to review this over the coming months as and when more information becomes available.

To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where data content is particularly weak in a given quarter because of a higher level of forecast content. The balancing adjustments applied in this estimate are shown in Table 6. The resulting series should be considered accordingly.

GDP monthly estimate

Although this release focuses on providing the best quarterly estimate of GDP, an indicative monthly path for the updated time series is provided in the dataset. A full breakdown of the monthly data consistent with this quarterly release will be available in the next monthly GDP release (on 13 October 2022).

The UK National Accounts are drawn together using data from many different sources. This ensures that they are comprehensive and provide different perspectives on the economy, for example, sales by retailers and purchases by households. Further information on measuring gross domestic product (GDP) can be found in the Guide to the UK National Accounts, and more quality and methodology information (QMI) is available in the Gross domestic product (GDP) QMI.

Important quality information

There are common pitfalls in interpreting data series, and these include:

• expectations of accuracy and reliability in early estimates are often too high
• revisions are an inevitable consequence of the trade-off between timeliness and accuracy
• early estimates are based on incomplete data

Very few statistical revisions arise as a result of “errors” in the popular sense of the word. All estimates, by definition, are subject to statistical “error”.

Many different approaches can be used to summarise revisions; the “Accuracy and reliability” section in the Gross domestic product (GDP) QMI analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations.

GDP estimates for Quarter 4 (Oct to Dec) 2021 are subject to more uncertainty than usual as a result of the challenges we faced estimating GDP in the current conditions. Differences in the methods for estimating the output of health and education services across different countries mean GDP may be less internationally comparable during the coronavirus (COVID-19) pandemic and recovery than usual, so comparisons should be made with increased caution. For more information, please refer to our recently published blog Minding the Gap: Why has UK GDP fallen so sharply in the pandemic?