1. Why is GDP revised? Graeme Walker Head of National Accounts
Royal Statistical Society: 30 May 2012

2. Historical perspective Some numbers
Outline
Revisions in general
How GDP is compiled
GDP revisions
Historical perspective
Some numbers
Levels
Growths
Conclusions
What’s next?

3. Revisions to economic series
Revisions are a fact of life for most economic series
Or else:
The first estimate is delayed
Later information is ignored even when it tells a different story
Balance between accuracy and timeliness

4. How GDP is compiled (1) Three measures Many sources
Output, Expenditure and Income
Perfect statistical world – all equal
Many sources
Monthly, Quarterly, Annual
Various timings
Monthly turnover (IoP around 6 weeks)
Annual tax returns (15 months)

5. Preliminary estimate (25 days)
How GDP is compiled (2)
Preliminary estimate (25 days)
Accuracy and timeliness trade-off
One of the fastest in the world
Based exclusively on output, 44% data
Second estimate (8 weeks)
Growth based on output, 83% data
Publish all measures
Some provisional expenditure sources
Limited direct income information
Use of quarterly alignment adjustments

6. Quarterly National Accounts
How GDP is compiled (3)
Quarterly National Accounts
13 weeks
Based on output, 92% data
Similar to second estimate
Expenditure components more firm
Revisions to previous periods but not for SU balanced years
When 4 quarters are published
Seasonally adjusted annual constrained to equal unadjusted annual

7. Balanced supply and use
How GDP is compiled (4)
Balanced supply and use
Framework for confronting differences
Levels not growths
110 industries and products
First balance after around 18 months
BB12 balances 2010
Not all benchmarks always received
Second balance is usually “final” except for methodological changes

8. Why is GDP revised?
Output source data revised
Expenditure and income
Revised seasonal factors
Annual chain-linking changes weights
Supply and use balancing
New methods
New international frameworks

9. Historical perspective
Before 1989 – 4 measures published
Output, Expenditure and Income
Average (unweighted)
First estimate (11 weeks)
Poor service sector coverage
Construction
q1 87 revision
No attempt to balance the measures

10. 1988 Autumn Statement
Difficult to assess how economy has been performing in first half of 1988

11. Historical perspective
Pickford review led to current methodology
Improved short term surveys
Balanced measure for years up to t-2
Chain linking in 2003
Avoided major revisions with 5 year rebasing

12. Some numbers: Revisions to GDP levels
Balancing supply and use fixes annual level not quarterly growth
Use quarterly path from output anchored to SUT levels
Generally small apart from methods changes

22. The Recession: Q to Q3 2009

23. Preliminary to QNA growth
Revisions to Growth
Preliminary to QNA growth
Last 20 periods
Average p.p: not biased
Absolute average 0.13 p.p
5 times unchanged;10 times by 0.1 p.p
3 times by 0.2 p.p
Q revised by 0.3 p.p
Q revised by -0.5 p.p (Blue Book)
No benefit in delaying preliminary estimate from 25 days to 13 weeks

24. QNA to Latest Evidence from the recession incomplete
No evidence of bias yet
Absolute average revisions higher
0.4 p.p for period 1998 to 2007
0.7 p.p for period 2008 and 2009
Actual revisions now negative
+0.2 p.p for period 1998 to 2007
-0.2 p.p for period 2008 and 2009
Impact of methodological changes
Continue to monitor closely

25. Case study: Q3 2009 Published in Oct 09 as a fall of 0.4%
Revised to -0.3% in Nov 09
Services sector output
-0.2% in Dec 09
Quarterly construction data
Back to -0.3% in Feb 10
Finance and Business services
+0.2% in BB 2011,revision of 0.5 p.p
0.2 p.p from new sources and SUT
0.3 p.p from changing deflation methods

26. A reminder

27. Conclusions
Revisions between Preliminary and QNA continue to be small and unbiased
Subsequent revisions have been higher since 2008 but still unbiased
Partly explained by BB11 methods changes
Impact of Supply and Use
ONS monitoring methods through the recession
BB 2012 will provide more evidence

28. What’s next?
BB 2012 – Improvements to the treatment of insurance in line with international best practice
BB 2013 – More methods improvements; Whole of Government Accounts likely; full scope to be published later this year
BB 2014 – New National Accounts framework (ESA10)
Analyse revisions by reason rather than over time (feasibility)
Continue to monitor revisions

29. References Revisions policy
Detail of Supply and Use tables structure
Whole of Government Accounts
Revisions triangles
Improvements to the measurement of Insurance Services
Various National Accounts articles, including "National Accounts: A short guide"

30. Questions Email: graeme.walker@ons.gov.uk