Last Friday saw the release of the preliminary estimate of the UK Q1 2010 GDP figure. The economy was shown to have grown by 0.2% in the first three months of the year, compared to 0.4% in the final quarter of 2009. This was less than the 0.5% that analysts had expected. These forecasts always confuse me a little...are analysts forecasting what they think GDP grew by in the quarter or what the preliminary estimates will show...a distinctly different calculation.
The preliminary reading is based upon 40% of the data needed to make a complete reading, compared to 60% at the second reading and 80% at the final reading. With more data available for the earlier part of the quarter, the preliminary readings are skewed towards what went on in the first two months.
Given the terrible weather conditions in the first part of the quarter, which shut down factories, kept people away from work and resulted in a sharp fall in retail sales, it is more surprising that the preliminary estimates are not worse.
Nevertheless, other indicators suggest that the economy strengthened throughout the quarter, recovering output and sales from the bad weather period. Therefore, like the previous few preliminary GDP estimates, it is again highly likely that future readings will be revised higher. The 0.5% growth in GDP that analysts were expecting may well become a reality or possibly even prove too pessimistic!