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Scottish Index of Gross Domestic Product 2006 Q2

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25 October 2006

A Scottish Executive National Statistics Publication

NEXT PUBLISHED (Provisionally): 24th January 2006

This document is also available in pdf format (167kb)

GROSS DOMESTIC PRODUCT FOR THE SECOND QUARTER OF 2006

Gross Domestic Product in Scotland rose by 2.2 per cent over the year to the end of 2006 Q2 and grew by 0.6 per cent during the second quarter of 2006 according to provisional estimates released today by the Scottish Executive.

The main findings of the latest figures are:

  • GDP rose by 2.2 per cent over the year to the end of 2006 Q2 and grew by 0.6 per cent over the second quarter of 2006 (seasonally adjusted).
  • Over the year to the end of 2006 Q2, annual output in the Scottish service sector grew by 2.9 per cent, compared with a 1.1 per cent decrease in the production sector and a 4.6 per cent rise in construction.
  • In the second quarter of 2006, the service sector grew by 0.9 per cent, the construction sector rose by 0.2 per cent and the production sector declined by 0.2 per cent.

UK Figures:

  • The UK figures show that GDP rose by 2.3 per cent over the year to the end of 2006 Q2 and by 0.7 per cent over the latest quarter.
  • Over the year to the end of 2006 Q2, the UK experienced a 3.3 per cent growth in services, a 1.4 per cent decline in production and the construction sector remained constant.

Industry Analysis:

  • Over the latest quarter, the service sector grew by 0.9 per cent. Within this sector the real estate & business services (+1.7%) sector was the main driver of the quarterly increase, followed by financial services (+2.0%), and retail (+2.3%). Banks (-0.4%) and hotels & catering (-0.1%) both declined over the latest quarter. Public admin, education & health remained essentially constant (-0.0%) but all other service industries grew over the quarter.
  • Output in the production sector declined by 0.2 per cent over the quarter. Within production, the mining & quarrying and manufacturing industries fell by 3.8 per cent and 0.2 per cent respectively. This was partially offset by growth in the electricity, gas & water supply sector of 1.2 per cent.
  • Within manufacturing the main industries showing a decline over the quarter was electrical & instrument engineering (-2.1%) and chemicals & man-made fibres (-2.0%). The main sectors showing growth over the quarter were transport equipment (+2.3%), other manufacturing (+1.0%) and paper, printing & publishing (+1.3%)

List of Tables

Table 1: Gross Value Added Chained Volume Measures at Basic Prices, by Category of Output

Table 2: Gross Value Added Chained Volume Measures at Basic Prices, by Category of Output

Table 3: Gross Value Added Chained Volume Measures at Basic Prices: Services Industries

Table 4: Gross Value Added Chained Volume Measures at Basic Prices: Detailed Service Industries

Table 5: Gross Value Added Chained Volume Measures at Basic Prices: Production Industries

Table 6: Gross Value Added Chained Volume Measures at Basic Prices: Detail Production Industries

Table 7: Gross Value Added Chained Volume Measures at Basic Prices, by Category of Output

Table 8: Revisions to Data Published on 26 July 2006 (Table 2)

Table 9: Revisions to Data Published on 26 July 2006 (Table 3)

Table 10: Revisions to Data Published on 26 July 2006 (Table 4)

Table 11: Revisions to Data Published on 26 July 2006 (Table 5)

Table 12: Revisions to Data Published on 26 July 2006 (Table 6)

Table 13: Revisions to Data Published on 26 July 2006 (Table 7)


BACKGROUND NOTES

Definitions

1. Gross Domestic Product ( GDP) is a measure of the value of goods and services produced by residents, before allowing for depreciation or capital consumption. Net receipts from interest, profits and dividends abroad are excluded. The estimates produced in this publication measure GDP at basic prices (also referred to as gross value added ( GVA)).

Chainlinking

2. In February 2004, on publication of results for 2003 Q3, the Scottish GDP estimates moved to annually weighted and chained estimates of volume measures - referred to as "annual chainlinking" - as recommended in the System of National Accounts 1993. This is consistent with the UK where this approach was introduced on 30 September 2003 in respect of the 2003 Q2 results. Annual chainlinking is achieved by producing a weighted average of over 260 separate indices (160 of which are in the production sector). The indices represent changes in the value added, at constant prices, in the production of goods and services in individual industries. These industries are compiled using the standard industrial classification SIC2003.

3. The main difference between chainlinking and the previous "fixed base" methodology is that the weights applied to each industry (reflecting their importance to the Scottish economy) are updated on an annual basis, instead of a 5-yearly basis. The major effect of chainlinking has been to reflect the changing importance of sectors.

4. The weights have been updated to 2003 for this publication in accordance with the annual chainlinking methodology.

Seasonal Adjustment

5. The data used in the production of these quarterly GDP estimates are seasonally adjusted where appropriate to remove regularly occurring peaks and troughs so that the underlying trends and other features of the data are easier to identify. A major methodological improvement has been implemented this quarter to replace the software used to create seasonally adjusted estimates.

Background

6. Series are derived from indicators based on data from a wide range of sources. Examples include: deflated turnover, deflated production, the volume of a good or service sold or produced and, for some parts of the public sector, employee numbers.

7. The quarterly Scottish GDP estimates are published within 4 months (approximately 17 weeks) of the end of the quarter to which they relate.

8. The indices published within this Statistics Publication Notice are grouped according to the 2003 revised Standard Industrial Classification. The four broad groupings of industries are

(a) agriculture, hunting, forestry & fishing;

(b) production which comprises: mining & quarrying industries; energy & water supply; and manufacturing, which includes: refined petroleum products & nuclear fuel; chemicals & man-made fibres; metal & metal products; engineering & allied industries; food, drink & tobacco industries; textiles, footwear, leather & clothing; other manufacturing;

(c) construction;

(d) services, which includes: retail & wholesale; hotels & catering; transport, storage & communication; financial services; real estate & business services; public administration, education & health; other services.

9. Scottish GDP estimates will generally be less reliable than the estimates for the UK, primarily because the equivalent UK figures are produced by balancing 3 independent sets of estimates (Output ( GVA), Income & Expenditure-based approaches). Furthermore, the survey data tend to be based on smaller numbers of units, making figures for Scotland more likely to be subject to small random fluctuations.

Cash Estimates of GVA

10. Estimates of the cash value of gross value added ( GVA) at current prices for Scotland (and other regions of the UK) are produced by the Office for National Statistics. Estimates for 2004 were published on 21st December 2005. The ONS current price value estimates are methodologically different from the Scottish Executive volume (constant price) index and are based on different data sources.

Revisions

11. The figures in this Statistics Publication Notice incorporate revisions to previously published estimates. The degree of revision this quarter is higher than usual due to the updating of industry weights to 2003; identification and correction of a long-standing systematic error affecting the deflation of retail, other services and the financial services adjustment; and from a number of improvements to methodology and input data.

12. Examined in isolation, the effect of applying the new weights to the overall GDP index is negligible: almost no effect upon annual average growth between 1998 and the base year (2003) although annual average growth between 2003 and 2005 increased by 0.1 per cent. An article providing more information about the chainlinking methodology was published in Scottish Economic Statistics 2004 available at www.scotland.gov.uk/stats/ses.

13. The effect, in isolation, of correcting the deflation system has been to reduce average annual growth between 1998 and 2005 by 0.1 per cent. However, revised input data and methodologicial changes, particularly those affecting the construction sector have counteracted these revisions resulting in no net change in overall average annual growth over the period compared to previously published estimates.

14. The impact of the change in the seasonal adjustment methodology is the appearance of numerous small revisions to individual quarters which are negligible at the annual level.

15. Tables 8 - 13 identify the extent of revisions since the last publication in July 2006. Note that revisions to the base year (i.e. 2003) causes revisions to the index to appear elsewhere in the series but actual revisions to GDP growth rates may not exist. Revisions are shown to one decimal place for total GVA and GVA excluding oil & gas and to zero decimal places for all other sectors.

The series most affected by revisions this quarter are:

  • Agriculture, forestry & fishing - due to updated data for all subsectors and adoption of an improved methodology for calculating quarterly estimates for agriculture.
  • Manufacturing - due to updating of industry weights and a refresh of the panel of companies monitored in the other manufacturing sector;
  • Retail, Other Services and the financial services adjustment - correction of error in deflation system;
  • Financial Services - due to revised data for the insurance sector and revised industry weights;
  • Construction - due to a change in methodology, use of more detailed data and revisions to industry weights;
  • Transport - due to revised data and adjustments to seasonal factors.

A number of other series are affected by revisions to a lesser extent. These are mainly due to revisions to input data, revisions to deflators and adjustments to seasonal factors. A more detailed analysis of revisions this quarter is available on the Scottish Executive GDP website www.scotland.gov.uk/gdp.

National Statistics

16. National Statistics are produced to high professional standards set out in the National Statistics Code of Practice. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

17. Detailed results for all industries are available to download from the Scottish Executive website www.scotland.gov.uk/gdp.

Issued by

Office of the Chief Economic Adviser

Office of the Permanent Secretary

St Andrew's House

Regent Road

Edinburgh

EH1 3DG

Telephone

Press Office: Angela-Claire Coutts 0141-244-2547

Statistician: Andrew Mortimer 0131-244-3771



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