Gross Domestic Product (GDP) decreased by 0.7 per cent in the second quarter of 2012. The most significant contribution to this fall came from the construction sector; there was, however, also weakness in both the production and services sectors.
Impact of the changes in Bank Holidays
As part of the celebrations for the Queens Diamond Jubilee there were changes to bank holidays in May and June 2012. The end of May bank holiday moved to June and there was an additional day’s holiday in June. Over the quarter, this resulted in one fewer working days.
The change to the bank holidays has been classified as a statistical special event in line with ONS’s policy on Special Events. This is not a regular event, so no adjustment has been made to account for it as part of the seasonal adjustment process. It is not possible to quantify the impact of the changes to the bank holidays at this stage; retrospective analysis will be carried out, in line with the ONS special events policy, when data for later periods are available. The bad weather in the quarter may have also had an impact in some sectors although it has not been formally designated as a special event.
Standard methods for producing the preliminary estimate of GDP largely use monthly data for the first two months in the quarter and nowcasts for estimating the third month. The monthly data for the first two months includes the ONS Monthly Business Survey (MBS) of 44,000 businesses, covering the production, manufacturing, services, retail and construction industries. The nowcasts for the third month are reinforced by early returns to the MBS but the monthly response rate is generally low at this stage. The change in the timing of the bank holidays adds additional uncertainty to the nowcast estimates although there is some information to guide us from the past:
• The Golden Jubilee in 2002 saw exactly the same change in bank holidays. It is possible that the impact in 2012 might be similar although it must be recognised that the economy has changed in the last 10 years and is at a different point in the economic cycle
• The additional bank holiday in April 2011 for the Royal Wedding may provide some further indication of the impact of the Diamond Jubilee. The fact that it is more recent makes it more relevant to the situation in 2012. However, in 2011 the additional bank holiday was prompted by an event of a different nature, and this may have generated a different response. In addition, it was on a different day of the week, and at a different time of the year. It also closely followed Easter, which may have had an impact on associated holiday travel patterns
• The data for May 2012, which includes one less bank holiday compared with normal, provides further indication of the impact of a bank holiday. The data for May is largely available (it has already been published for Production and Construction; and the Services data for May is published today)
The nowcast for June uses the standard ONS method of fitting an autoregressive integrated moving average (ARIMA) model and making adjustments for Easter, Trading Days and outliers. To improve the June 2012 nowcast an additional variable was included to account for the bank holiday changes in May and June. The adjustment for this additional variable was estimated using data for May and June 2002, and April 2011. Nonetheless, it is important to remind users that the estimates for June, and therefore the estimates for the quarter, may be subject to greater uncertainty than usual and therefore increase the chance that the GDP estimate will be revised.
The average revision without regard to sign between the Preliminary Estimate of GDP and the Third Estimate is minus 0.02 percentage points and the absolute revision is plus 0.13 percentage points (based on revisions performance between quarter one 1997 and quarter one 2012). In 2002, when we saw the same changes in bank holidays, the actual revision between the Preliminary Estimate of GDP and the Third Estimate was minus 0.27 percentage points. However, the original estimate for 2002 was not informed by other occurrences of recent bank holiday changes.
The estimates for June for each of the sectors are shown in below:
Estimates for growth in June 2012
Sector Growth (per cent) for June compared with May
Production -3.5
Construction -7.0
Services -2.2
Table source: Office for National Statistics