UK economy grows by 0.3% in May

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The UK’s economy grew 0.3% in May, latest figures show.

The assessment by the Office for National Statistics marks a change in the way the UK’s GDP is calculated.

From now on, the ONS will release a monthly indicator and a rolling three-month figure. Previously it only put out growth statistics every three months.

In the three months to May, the economy grew 0.2% compared with the previous three-month period.

Why have the UK’s economic statistics changed?

Basically, in an effort to make them more reliable.

Until now, the ONS used to release a preliminary estimate of GDP four times a year.

But this early quarterly estimate was based on about 40% of the information necessary to produce a full estimate of GDP, so it was subject to change as more data came in.

The new policy should mean that the figures do not need to be revised as much in subsequent months.

How have the statisticians managed to do this?

The ONS’s new monthly and rolling three-monthly estimates will be compiled with what it calls “a significantly higher data content”.

The office says it has spent money on upgrading its systems so that it can gather and analyse information in a more timely fashion.

In particular, the service sector, which contributes 80% of the UK’s GDP, will now be measured more speedily than before, it says.

What are the advantages and disadvantages of the change?

It will bring the UK more into line with other developed economies, which tend to produce more accurate initial quarterly estimates that don’t need such big revisions.

In fact, the ONS intends to leapfrog other countries, by making the UK the first big economy to produce a monthly figure.

However, in the short term, it could be bad news for one of the ONS’s biggest customers, the Bank of England.

The Bank’s interest rate-setting Monetary Policy Committee is due to meet on 2 August, amid speculation that it could raise rates by a quarter of a percentage point to 0.75%.

Under the old timetable for release of GDP figures, MPC members would have been armed with a preliminary estimate of second-quarter growth. But now those figures will not be available until 10 August.

The ONS says those figures will be more comprehensive and accurate because of the delay. But that is no help to Bank policymakers as they wrestle with their key economic decision.

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