-Inventory accumulation added 1.3 pp to growth
-Household incomes rose by 1.9 per cent, biggest increase in 3 years
-The household savings ratio improved to 6.7 per cent from 6 per cent before


The UK's gross domestic product (GDP) decreased by 0.4 per cent in volume terms between the first and second quarters of 2012, revised from a previously estimated decline of 0.5 per cent, according to the latest data available from the Office for National Statistics (ONS).

The consensus estimate had been for the reading to remain unchanged versus the preliminary estimate of -0.5%.

Versus a year ago economic output dropped at a 0.5% pace, as expected.

The main reason for the above revision is that construction output grew by 3.0%, revised up from the previously estimated fall of 3.9%.

As well, output of the production industries decreased by 0.7%, revised up from the previously estimated decline of 0.9%.

Manufacturing output contracted by 0.8% in the second quarter of 2012, revised up from the previously estimated decline of 0.9%.

Output of the service industries fell by 0.1%, unrevised from the previously published estimate.

Meantime, and on the expenditure side of things:

Household final consumption expenditure decreased by 0.2% in volume terms in the latest quarter, revised up from a previously estimated decline of 0.4%.

Business investment -however- experienced the largest revision, of 2.4 percentage points, which changed the sign to growth of 0.9% quarter-on-quarter. "In doing so, it helped explain part of the disparity between dire domestic demand and yet strong import growth," economists at Nomura comment.

To be had in account nevertheless, inventory accumulation added 1.1 percentage points to the rate of GDP expansion.

The contribution of net trade was also revised up by 0.2 percentage points, although it still detracted 0.8% from quarterly growth.

Government consumption fell by 1.6% quarter-on-quarter, although the level was not that much lower than previously estimated owing to upward revisions for the first quarter.

Real household disposable incomes bound higher

Of potential interest, in current price terms compensation of employees rose by 0.2% in the second quarter of 2012, revised down from a previously estimated increase of 1.2%, ONS states. Even so, however, real household disposable income rose by 1.9% quarter-on-quarter, the biggest jump for three years, as the result of an increase in nominal income growth to 3.0% quarter-on-quarter from 1.0% in quarter one, with wages and salaries growing by 2.1% in terms of quarterly rates of change, Barclays Research says.

Some other observers however are pointing out that real disposable incomes were in fact also boosted by higher net social benefits and property income.

Be that as it may, the above has led The Economist to write today that: "the economic storms that have deluged Britain since 2008 have not cleared entirely. There is no reason for policymakers to relax, let alone celebrate. But the weather at last appears to be improving somewhat."

Furthermore, the household savings ratio improved to 6.7% from 6% before.

Lastly, some economists expect to see still further upwards revisions to the estimate for second quarter 2012 growth in future releases.

Commenting on today's data, this is what economists at Barclays Research had to say: Today's revised estimates left the broad configuration of demand broadly unchanged, with net trade (-0.8%) and fixed investment (-0.4%) the principal contributors on the downside, offset by a 1.3% boost from inventory accumulation. (...) Despite the modest upside news in the headline GDP growth rate, the configuration of demand in Q2 remains one of weakness in most of the core domestic and external final demand components offset only by volatile stockbuilding activity. In our view, this continues to suggest underlying demand weakness persisting into Q3."



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