The monthly GDP estimates from the National Institute of Economic and Social Research (NIESR) are highly respected measures of the key broad-based indicator of economic activity. They provide a means of consolidating disparate data into GDP, a single and easily understood measure.
Writing in the February 2005 issue of the Economic Journal, NIESR Director Martin Weale and his colleagues explain how the monthly indicator is produced. The estimates rely on movements in the monthly series of data for industrial production, manufacturing output and retail sales. Once two months” data for any calendar quarter are available, it is possible to use standard statistical techniques to forecast the data for the third month. Using such forecasts, the National Institute produces an estimate for the growth in GDP in calendar quarters. The estimates are intended to track the first estimate of GDP growth published by the Office for National Statistics (ONS) and anticipate it by about three weeks.
The National Institute has published the indicator since 1998. There have been only three occasions since then when the error has been as big as 0.3% of GDP in absolute size. Two of these have been associated with unusual events, the first with the fuel protests in September 2000 and the second with the Golden Jubilee in June 2002. The data were also badly disrupted during pre-release testing by the Princess of Wales” funeral in September 1997. Two of these three large errors arose because the data in the third month of the quarter were disrupted and the standard forecasting method performed badly. Of the other twenty-five quarters for which NIESR has published early estimates of GDP growth, nine have been exact, eleven have had errors of 0.1 percentage points and four have had errors of 0.2 percentage points.
Taking all the estimates since the start of 1998, the standard error has been 0.14% and the correlation between NIESR”s estimate and the first official estimate is 0.9. The NIESR data are made available by press release at 1pm on the same day in each month as the ONS releases its estimates of industrial production. Their production is funded by subscribers who receive the estimates one and a half hours before the press release.
”An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP” by James Mitchell, Richard Smith, Martin Weale, Stephen Wright and Eduardo Salazar is published in the February 2005 issue of the Economic Journal.
020-7654-1945 | M.Weale@niesr.ac.uk