This morning has brought some welcome news for the UK as we learn that our official statisticians have been busy and produced this.
Overall, the changes in this blue book raise the level of nominal GDP over the time period, with the level now estimated to be 1.5% higher in 2023, where changes have fed through gradually before 2019.
We could do with some better news in these times but there is a catch above in the reality that we are looking at nominal GDP. So the news will be most welcome at HM Treasury as it improves debt metrics with a bit under 80% of our national debt being conventional and thus paid in nominal terms. If we move to volume changes then the positive vibe is smaller.
Cumulative volume growth from 1997 to 2023 is now estimated at 57.6%, revised up from the previous estimate of 57.0%, where upward revisions to real GDP growth are smaller than for nominal GDP largely because of an improved approach for measuring education output.
As the method for measuring educational output rather blew up the UK GDP numbers during the pandemic, hopefully they now have a better grip and in the words of The Beatles “It can’t get much worse”. Or as I put it back on the 6th of August 2020.
The implied deflator strengthened in the second quarter, increasing by 6.2%. This primarily reflects movements in the implied price change of government consumption, which increased by 32.7% in Quarter 2 2020.
Just at the time we were being told there was no inflation there was apparently lots of it although there was a nuance.
I helped Pete Comley with his book on inflation a few years ago with some technical advice and proof reading. I recall him telling me that he had looked into the deflator for the government sector and had discovered they pretty much make it up. Today’s figures support that view.
Hopefully they now have a better grip although sadly the use of “improved” by our official statisticians has a poor track record.
R&D
This area attracted my attention partly because it is an area which has been a worry for the think tanks and chattering classes.
This has the effect of increasing the size of the economy in every year as the improved data showed that more R&D, and therefore more economic activity overall, was taking place. While this improvement mainly affects the level of GDP, it also makes a positive contribution to growth over time, particularly in more recent years.
As you can see here is yet another sign of trouble caused by taking the GDP numbers too literally.
Pharmaceuticals
Those who follow my work will know that I regularly point out the problems that are obvious in this sector in the wild swings seen in the monthly GDP release. Today brings rather a confession on that front.
However, following a pilot two years ago, we have now worked in partnership with multinational companies in the pharmaceutical sector to ensure their output around the world is being recorded more accurately.
This work has had the effect of boosting pharmaceuticals and the manufacturing sector as their directly owned production abroad now counts towards UK GDP.
So they have missed important parts of this for some years and frankly anyone following this sector should be aware of the large flows across countries. Let’s face it this has blown up the measurement of GDP in Ireland. Returning to the good news theme it helps trade too.
The pharmaceuticals review also has the net effect of reducing the UK’s trade in goods deficit,
Baron King of Lothbury
Tucked away in the detail is more bad news for the rebalancing theme of the former Governor of the Bank of England.
The services sector has consistently contributed over 70% of the UK’s GVA since 1998 and currently contributes around 80%.
Is it the job of Bank of England Governors to be wrong as the manage it so frequently?
UK Solar Power
Here is the Financial Times on this issue.
Solar power generation in Britain so far this year has surpassed the total for 2024 as panels are rapidly installed amid favourable weather, underlining renewable energy’s increasing importance to the grid.
Sadly there is some spinning here because as someone who follows the numbers each day I know that solar power output was a disappointment in earlier parts of this year with the weather being unfavourable. But we can now welcome this and I have been seeing more days where we have exceeded 12 GW/h at the daily peak.
Some 14.08 terawatt hours of electricity was produced from solar in Great Britain by August 16, about one-third higher than at this time last year, a Financial Times analysis of University of Sheffield data has found.
Returning to peak power we are told this.
For one half-hour period on July 8, solar output was a record 14 gigawatts, meeting almost 40 per cent of Britain’s electricity demand during that period, according to the National Energy System Operator (Neso). Between January and July, solar-power” supplied about 10 per cent of England and Wales’ electricity.
There is also quite a bit of scope for number-crunching here.
Investment by developers has nonetheless resulted in a big increase in solar plants over the past five years, government data shows. Of the 18.1GW of solar capacity online in the UK as of the end of March, more than 12.4GW was supported by some government subsidies and 5.6GW was not.
Industry says the total capacity is higher than official government figures, at about 22GW.
Sheffield Solar has capacity at 21GW so if we take their number we see that at best we have made two-thirds of that which questions reporting like this.
This is enough to power 5.2mn homes for a year, or the London Underground for more than a decade.
So we are vague about the capacity and anyway we never get anywhere near it in a repetition of an issue with the wind power numbers. What use is a capacity you never reach?
grid bottlenecks……….The move came after the developers of some proposed solar schemes had been told they would not be connected to the grid until the late 2030s.
Sometimes you really could not make it up and let me finish the good news with the fact that more capacity is on its way and we have a government minister telling us this.
Energy minister Miatta Fahnbulleh said the findings were “a clear sign that our clean power mission is working”, and that the solar rollout would help lower energy bills, tackle the climate crisis and reduce the UK’s reliance on “volatile fossil fuel markets”.
Comment
As we frequently have bad news I thought that I would counterpoint with some good news today. But now let me give some nuance as there is very little in the statement by the UK Energy Minister that is true. Let us start with lower bills from solar power.
“There’s no question that solar is the cheapest form of power generation so there’s a real optimism for the economic opportunity,” said Chris Hewett, chief executive of trade body Solar Energy UK.
As you can see that point is reinforced but even they admit batteries are needed.
Developers are also increasingly looking to install batteries alongside solar farms, so as to allow a constant supply of power. This has been enabled by falling costs of batteries in recent years because of supply from China.
As I understand it batteries are very expensive for storing power and only work for a limited period. After the blackout there using Spain is not the best example and of course it has a geographical advantage.
Bell added: “As costs continue to decline . . . it’ll just make more sense to install more and more until electricity during the middle of the day becomes essentially free as it already nearly is in Spain.”
Staying with the price issue Solar is only cheap if you ignore all the other costs it brings. I have already looked at batteries but right now with putput onlu 4GW according to Sheffield Solar shows that even in summer it is variable therefore you need to pay for back up challenging the minister’s assertion about reducing our reliance on fossil fuels. That is before we get to the issue of winter and solar output then. It provides its lowest output when we most need power.
The GDP news today is positive but I am sorry to day that our official statisticians remain in rather a mess.
ONS delays publication of July retail sales report until 5 September. ( @MrMBrown)
