Understanding the quality of early estimates of Gross Domestic Product

Abstract

There has been considerable attention paid in recent months to Office for National Statistics early estimates of Gross Domestic Product (GDP). These estimates provide a timely indication of the evolution of the economic cycle, and there has been particular interest in their reliability, given the potential for the estimates to be revised. This article describes the context in which the offi cial estimates of GDP are produced, and examines the reason for revisions to early estimates. It goes on to discuss how these revisions can best be analysed over different maturities of the estimates and points out some potential pitfalls. Based on this discussion, it offers guidance on the best approach to understanding the revisions cycle and for interpreting the published information on revisions. The article then presents the results of analysis of a new real time database for GDP growth in the UK, which contains a time series of estimates back to 1961. Over the period since the mid-1990s, revisions have been much smaller than previously, perhaps reflecting the relative stability of the economy over this time. The article concludes by discussing the issues surrounding the use of bias adjustments for GDP.