Monthly GDP estimates indicate growth in output

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The National Institute of Economic and Social Research (NIESR) announced its monthly GDP estimates on Tuesday; suggesting that output in the three months ending in February grew by 0.8%, following growth of 0.7% in the three months ending in January 2014.

These estimates imply that output is less than 1% below the pre-recession peak in January 2008 and the NIESR said it anticipates a return to this peak during 2014. The Bank of England’s MPC is not expected to adjust interest rates until the second quarter of 2015.

NIESR added that its latest quarterly forecast, which was published 7 February 2014, predicts GDP growth of 2.5% per annum in 2014 and 2.1% in 2015.

Data obtained for early estimates of GDP by the NIESR indicates that the projection for the most recent three-month period has a root mean squared error (RMSE) of 0.234% point (for the full sample period 1999 Q3-2013 Q4) when compared to the first estimate produced by the Office for National statistics (ONS). For the period 2008 Q1 to 2013 Q4 the RMSE is 0.334% point. Adverse weather in 2010 Q4 resulted in a noticeable outlier, so excluding 2010 Q4 from the analysis; the RMSE for the full sample period is 0.195% point. For 2008 Q1 to 2013 Q4 the RMSE is 0.258% point. These comparisons can be made only for complete calendar quarters. The estimates are produced using a model of private services output based on indicator variables. While all NIESR figures for calendar quarters are fully coherent with ONS data, the estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series, according to  NIESR.

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