R & D Spend Down 2%

Gross domestic expenditure on research and development (R&D) fell by 2% to £27m in 2012 compared with 2011. When adjusting this for inflation R&D expenditure fell by 3%. Since 1985 R&D expenditure has increased by 56% from £17.3bn in 1985 peaking at £27.9bn in 2011.

The business sector contributed 63% of all UK R&D expenditure in 2012. At current prices expenditure decreased by 2% to £17.1% in 2012 compared with 2011. Total expenditure on R&D in the UK in terms of GDP was 1.72%, down from 1.77% in 2011. When UK figures are compared internationally UK R&D is below the EU28 provisional estimate of 2.06% of GDP.

GDP Down 0.3%

GDP fell by 0.3% in Q4 2011 according to the quarterly national accounts (QNA) bulletin from the ONS. In volume terms GDP increased by 0.7%.

Production output fell by 1.3%, services output by 0.1%. Household consumption increased by 0.4%. Compensation of employees increased by 0.9%. Agricultural output fell by 1.5% in Q4 2011 compared with a decrease of 0.5% in Q3. Services output decreased by 0.1% compared with an increase of 0.8% in Q3. Services output increased by 1.6% over 2011.

Analysed in term of expenditure, GDP decreased by 0.5% in Q4 2011. Household final consumption increased by 0.4% compared with a decrease of 0.3% in Q3. The largest increase in spending was in miscellaneous services driven by life assurance and other services. Recreation and culture increased during the quarter but rises were offset by falls in spending on housing with electricity, gas and other fuels reporting the largest fall. Over the year of 2011, household final consumption fell by 1.2%.

Income categories analysis shows GDP at current market prices rose by 0.6% compared with a 0.9% increase in Q3. While compensation of employees rose by 0.9% in Q4 over the year 2011 it increased by 2.1%. The gross operating surplus of corporations fell by 1.3% over the quarter and grew by 0.2% over 2011, private non-financial corporations rose by 2% over the quarter but financial corporations operating surplus fell by 15%.

GDP Grows By 0.5% In Q3

The second estimate of GDP for the third quarter of 2011 was published by the ONS recently. The headline figure for GDP in Q3 2011 increased by 0.5%.

Analyzed by output, the production industries rose by 0.4% compared with a fall of 1.2% in Q2, mining and quarrying increased by 0.4% and manufacturing output rose by 0.2%. According to the income analysis GDP at current market prices rose by 1.5% and compensation of employees increased by 1.2%. The expenditure analysis suggests that GDP increased by 0.9% in Q3. Household final consumption expenditure remained unchanged. The level of household expenditure is 1.5% lower than Q3 2010.

Fall In Household Consumption

Household final consumption expenditure fell by 0.8% during the second quarter of 2011.

The biggest contributions to the negative growth were from the transport and food sectors. Positive contributions came from clothing and footwear and miscellaneous.

Increase In Budget Deficit In May

The UK Government reported a current budget deficit of £15.3bn in May 2011. Net borrowing was £17.4bn and net debt was £920.9bn. These figures exclude the temporary effects of financial intervention. Total receipts were £38bn and total expenditure was £51.7bn. Net investment was £2.7bn after accounting for depreciation of £0.6bn.

No Increase In GDP Estimate

The second estimate of GDP in volume terms remained as in April as an increase of 0.5% in Q1 2011. Output increased by 0.2% within which manufacturing increased by 1.1% and services by 0.9% but construction decreased by 4%. Output is now 2.4% higher than Q1 2010.

Employee income increased by 1.3% in Q1 2011 compared with 0.3% in Q4 2010. The operating surplus of companies increased by 1.4% in the first quarter of 2011. Taxes less subsidies on production increased by 7% but the VAT increase in January should be noted.

Household expenditure fell by 0.6% in the first quarter of 2011 and the level is now lower than in the same quarter last year by 0.3%. Government expenditure increased by 1% in the quarter and 1.1% over the year. Gross fixed capital formation decreased by 4.4% in Q1 2011 following a decrease of 1.8% in Q4 2010. Inventories' levels rose by £1.4bn in the last quarter.

The GDP deflator for Q1 2011 is 2.8% above the sdame quarter last year. Nominal GDP is up by 2.2% in Q1 compared with 0.5% in Q4 2010.

Family Food 2009

The Family Food 2009 annual report published by Defra recently showed that food prices were on average 5% higher in 2009 than in 2008 and consumers spent 3.6% more on food and drink. Food was less of a burden on low household incomes quintiles than in 2008 with the percentage spent on food and non-alcoholic drinks falling from 16.8% to 15.8% of total expenditure. In terms of calories consumers bought 1.2% more food but bought 3.1% less fruit and vegetables. Dietary nutrition indicators suggest a slightly negative shift in 2009. Defra also tells us in its WRAP survey that in 2008 15% of all food purchased was wasted.

GDP Figures Revised Down Again

The figure for GDP volume for the fourth quarter of 2009 has been revised again to 0.4% from 0.3% last month. The chained volume GDP index for Q4 was 100.9 and 100.4 for Q3. At current market prices the GDP index was 112.6 and in Q3 it was 111.3. In 2009 as a whole volume of GDP fell by 4.9%. Total volume of production rose by 0.4% and manufacturing output volume by 0.8%. The agricultural sector ouput fell by 1.5% compared with the previous quarter. Construction output decreased by 0.9% and services increased by 0.5%.

The household saving ratio was 7% compared with 8.4% in the last quarter. Real household disposable income fell by 1%. In terms of expenditure categories gross domestic expenditure increased by 0.8%, household final consumption increased by 0.4% and government final consumption increased by 1%. The volume of household spnding is now 2.1% lower than in 2008. Government final consumption for the year 2009 increased by by 2.2%. The GDP deflator at market prices increased by 0.7% and is 1.4% above the level it was at in 2008.

Gross fixed capital formation fell by 2.7% partly due to a fall in business investment of 4.3%. General goverment investment increased by 2.8%, existing buildings and dwellings in public corporations fell by 71.3% and in the private sector existing buildings and dwellings increased by 10.3%. Over the year as a whole gross fixed capital formation decreased by 14.9% compared with -3.5% in 2008.

A Fall In Investment In Services

Business investment for the third quarter of 2009 is estimated to have fallen by 3% to £28,393m, a fall of £885m. Investment by both private and public sectors in manufacturing has also fallen by an estimated 9.5% to £2,581m. Services sector investment was £19,825m, a fall of 2.2% and construction fell by 0.6%. Investment in services is estimated to have fallen by over 25% since the same time last year.

There was an increase in expenditure on both computer software and hardware during the quarter on the previous quarter but a decrease on the same quarter last year.

There were decreases in investment in distribution and public corporations. Within the services sector, reductions in expenditure occurred in real estate, renting, hotels and restaurants and education. These reductions are offset by increased expenditure in financial intermediation and transport and communications.

Govrnment Can Still Hit Fiscal Targets

Provisional estimates of public finances released last week by the ONS show that in August the public sector current budget had a deficit of £12.8bn and net borrowing of £16.1bn. At the end of August the public sector net debt was £804.8bn or 57.5% of GDP, compared to 52.7% in 2008-9. The public sector net cash requirement was £10.4bn. The public sector current budget in August 2008 was 7.7bn and net borrowing was 9.9bn.

In the financial year so far in 2009-10, there was a public sector current budget deficit of £52.9bn and public sector net borrowing of £65.3bn. The public sector net cash requirement was £57.1bn.

The public sector net debt, excluding the financial sector intervention, according to the latest figures which are up to June 2009 show public sector net debt was £658.2bn or 46.9% of GDP compared with 43.2% in 2008-9.

Total central government receipts in August 2009 were 34.1bn, down from 37.5bn in 2008 and total expenditure was 45.6bn, down from 44.2bn at the same time last year. The Institute of Fiscal Studies commented that receipts were 9.2% lower in August this year and spending 3% higher. The 2009 Budget suggested 7.6% and 7.4% respectively. Public sector net investment was £3.3bn compared to £2.1bn last August. Between April and August public sector net investment amounts to £12.4bn, 37% higher than the same period last year. The 2009 Budget predicted investment of £43.8bn, 16% above last year.

The Institute of Fiscal Studies also commented that Government borrowing was 2.5 times as large as last year rather than twice as large as predicted so borrowing will have to slow to hit their target which is still possible with the new increases in revenue that are due this month and in the New Year.

GDP Decline Revised Upwards

GDP fell by 0.7%, revised from 0.8%, in the second quarter of 2009 compared with the previous quarter. GDP is 5.5% lower than Q2 2008. It is the biggest four quarter fall on record accoring to the ONS. Nominal GDP showed no growth for the quarter. The GDP deflator rose by 1.3% compared with Q2 2008.

The slowdown in output from Q1 to Q2 is due to the services, production and construction sectors. Services fell by 0.6%, production by 0.6% and construction by 2.2%.

Household expenditure fell by 0.7%. An increase in spending on motor vehicles, food and drink was offset by the continued edcline of spending abroad. Government expenditure rose by 0.8%. The volume of spending is 2.5% higher than Q2 2008. The net trade deficit fell to £7.3bn as imports fell faster than exports at 3.7% and 2.6% respectively. The export of services fell by 2.6% and the import of services by 1.9%. Gross fixed capital formation fell by 4.5%.

Employee compensation increased by 1% in the quarter, but still 1.2% below the same quarter last year. The gross operating surplus of corporations decreased by 3.6% following a 4.5% fall in Q1 2009. Taxes less subsidies increased by 3.6%. There was no change in the growth of nominal GDP at market prices.

Government Receipts Down, Spending On Target

The latest public sector finances statistics from the ONS show that in July the public sector had a current budget deficit of £5.1bn and net borrowing of £8bn. At the end of July net debt was £800.8bn or 56.8% of GDP.

The public sector current deficit is £13bn higher than last year when there was a surplus of £7.8bn and the net borrowing is £13.2bn higher than last year when the public sector was lending net of £5.2bn. Latest figures for net debt without financial sector intervention are for June when net debt was £658.1 or 46.6% of GDP. Whereas last year the public sector made a repayment of £14.5bn the net cash requirement for July this year was £0.2bn an increase of £14.7bn. Comparing the net debt shows that last year the net debt was 43.5% of GDP at £627.2bn.

Government receipts were 15.3% lower than the same month last year and government spending was 7.5% higher. Net investment was £2.9bn compared with £2.6bn last year. The Institute of Fiscal Studies said that receipts of Corporation Tax and VAT collapsed to two-thirds of their July 2008 level more than the Treasury predicted in the Budget over the year. Spending is increasing as predicted. They also add that there are good reasons to expect a better performance in revenues over the next few months. The reversal of the VAT cut scheduled for the end of 2009 is one of them.

Debt Highest Proportion Of GDP Yet

The public sector current deficit was £9.9bn in June 2009 according to the Public Sector Finances bulletin from the Office for National Statistics and HM Treasury. Public sector net borrowing was £13bn. The net cash requirement was £19bn and the net debt £798.8bn or 56.6% GDP. The public sector net debt for June was £657.5bn. In the year 2009/10 April to June there was a current budget deficit of £34.1bn and net borrowing of £41.2bn. The public sector net cash requirement was £42.8bn. The Budget 2009 predicted public sector current budget of £132bn, public sector net borrowing of £175bn and public sector debt excluding financial sector interventions of 55.4% GDP at end March 2010. Financial sector interventions have had some effect on financial data. It has reduced the Central Government Net Cash Requirement (CGNCR) by about £2.5bn, mainly due to the disposal of company securities, but was neutral for the public sector as a whole.

The Institute for Fiscal Studies said the public finance figures may give some encouragement to the Government as tax receipts fell by only 5.7% in June relative to June last year. It is a smaller rate of decline than the 7.4% predicted for the whole of 2009/10. The figures may at first suggest slower spending growth but in fact without the financial sector intervention it can be seen that spending continues to grow. Fears about the use of public sector investment not being able to stimulate the economy quickly enough have not so far been borne out as investment has been £2.6bn higher than the same period last year.

Decreases In Distribution And Production Investment

Business investment statistics are estimated to show a decrease of 5.5% compared with the previous quarter and 6.8% with this time last year according to the Office for National Statistics. The decreases were estimated to have been in distributions services and production. Capital expenditure was also reduced in the real estate and renting, communications and hotels anf restaurants categories. The business investment figure for the first quarter of 2009 is estimated to have been £33,042 million. It was £34,952 in Q4 2008 and it has fallen from £35,771 in Q2 2008. Services account for £24,605 a fall for the 5th successive quarter from £27,149 in Q4 2007.