Bad Weather and Q4 2010 GDP

This post was written by Philip Lane

The estimate for Q4 GDP in the UK has come in at negative 0.5 percent (well below expectations of mildly positive growth), with the deviation ascribed to the terrible December weather.

Ireland’s Q4 GDP number does not come out until March but we should not be too surprised if a similar undershoot happens here, in view of the similar weather in December.

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19 Responses to “Bad Weather and Q4 2010 GDP”

  1. JohnTheOptimist Says:

    That is a obviously a possibility, although it means very little in the long-run, since whatever growth was lost to the weather in Q4 2010 will be largely recovered in Q1 2011.

    However, it doesn’t seem to be what ESRI are expecting. In their QEC last week (which, of course, will have factored in the bad weather in December), they revised up their estimates for both real growth and nominal growth in GDP in 2010, as compared with their previous QEC in October. In last week’s QEC, they forecast real GDP growth of positive 0.25 percent in 2010, compared with the negative 0.25 percent they were forecasting in October. And, in last week’s QEC, they forecast nominal GDP of 159bn in 2010, compared with the 157.8bn they were forecasting in October. These are very hefty upward revisions, given that the GDP figures for the first three quarters of 2010 are allready published.

    For these latest ESRI forecasts to turn out correct (and I have no idea if they will be), then either the allready-published estimates for GDP in the first three quarters of 2010 will be revised up OR there will be a q-o-q increase of over 3 percent in GDP in Q4 2010, or a combination of both. Only ESRI can say which combination of these they are expecting. Just to be clear: these aren’t my forecasts - I am simply interpreting for Q4 2010 GDP growth (the subject of the thread) the implications of last week’s ESRI forecasts for 2010 as a whole, but without any knowledge as to whether they will turn out to be accurate.

  2. grumpy Says:

    Can we have a site rule that anyone commenting on Irish GDP figures either uses a four datapoint moving average, or wears a pointed paper hat whilst typing their comment about the quarterly number?

  3. David Boyd Says:

    It will be interesting to see how Osborne interprets this and whether he will ease up on the cutbacks

  4. EWI Says:

    Speaking of the ESRI, has anyone seen Richard Tol in the last week? He seems to have fallen off the Internet. I can only assume that the following were to blame:

    http://scienceblogs.com/deltoid/2011/01/tolgate.php
    http://rabett.blogspot.com/2011/01/richard-tol.html

  5. JohnTheOptimist Says:

    As Philip Lane said above, Ireland’s Q4 GDP figure won’t be published until March (late March usually), when presumably there will be an FG-Labour Government in power. It will be interesting to see if, within a few days of an FG-Labour Government coming to power, Ireland goes ahead of the UK in the league table for year-on-year GDP growth. Just so that we know what the target is, without predicting whether or not it will be achieved.

    UK real GDP rose by 1.7 percent between Q4 2009 and Q4 2010.

    Ireland’s real GDP rose by 1.65 percent between Q4 2009 and Q3 2010.

    For Ireland to go ahead of the UK in the league table for year-on-year GDP growth (for the first time since Q4 2007, having been ahead every quarter between 1989 and Q4 2007), Ireland needs to record 0.1 percent or more GDP growth in Q4. No doubt if it is achieved, the FG-Labour Government will claim the credit for it. But, whoever is in power then, it would be hilarious if it were to occur, given the commentary in the UK financial media in recent months.

  6. Rory O'Farrell Says:

    When the British government sounds like B*Witched you know they are screwed.

  7. christy Says:

    Sorry to post off point

    Does anyone know where on the internet I can get data on the level and variability of net profit margins across companies and/or sectors?

    I need it ASAP

  8. PZ Says:

    Ricardian Equivalence just does not work. This is a good read for anyone who still believes in austerity: http://bilbo.economicoutlook.net/blog/?p=13236

  9. John O'Hagan (not TCD) Says:

    @ christy

    National Accounts data gives Net Operating Surplus (broadly = gross profits less depreciation), but in absolute values, not as margins. The most detailed results for Ireland (60 branch breakdown) are published on the Eurostat database, not in CSO’s own releases. See for example this table (hope it works for you)

    http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do. I’ve added Netherlands alongside Ireland just for illustration (and also UK, which seems to be empty, however - not sure why they don’t seem to report this variable to Eurostat). If the table doesn’t come up, construct it for yourself via this page http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

  10. John O'Hagan (not TCD) Says:

    @ christy

    Correction: the most detailed results for Ireland are at a more aggregated level - 31-branch breakdown, not 60. The 60-branch table reproduces the 31-branch breakdown.

  11. Michael Burke Says:

    The British ONS made it clear that their best estimate was that growth would have been 0.0% without the bad weaher. This is a considerable slowdown from 1.1% growth in Q2 and 0.8% in Q3.

    The change was brought about but the reduction in government spending.

  12. Joseph Says:

    I’m not convinced that the snow had that big an impact here over Q4 2010. I was out and about around the country a lot in November and December and there seemed to be a lot of activity in retail areas and councils were certainly making the effort to clear things up - even in central Dublin.

    A shame we have to wait until March to see what the figures are but perhaps that’s better than copying the UK - I think they only used about 40% of the data to come up with yesterdays -0.5% so we can expect some revision.

    Osborne blames the snow? It all sounds a bit flakey to me!

  13. irishmuffin Says:

    If you look at the numbers in more detail they show that the shortfall was broad and surely could not all be attributed to the weather.

  14. Joseph Ryan Says:

    Based on the following items I would be very pessimistic about Q1 of 2011.
    My pessisism is based on:

    1. The spending impact of the USC particularly on lower incomes.
    2. An 18% industrial electricity price hike since Sept. This does not take into account the rise in PSO obligation.
    3. Acecdotal evidence of several business updates to date in January
    4. Personal experience of business.

    Some of this may be offset by an “increase” in revenue from energy suppliers gouging price increases at the slightest excuse. The Energy Regulator’s office seems to function as the downtown offices of the ESB and Bord Gais for all the good they do for the rest of the economy.

  15. JohnTheOptimist Says:

    The trade figures published this morning indicate good growth in the economy in October and November. Exports up almost 18 per cent compared with the same two months last year. Very little data published as yet for December.

  16. David O'Donnell Says:

    @JohnTheOptimist

    Yes - Winston heard the rumour as well. Winston informs me that with the weather improving there should be fresh growth in the Spring in Oceania, and furthermore that the phoney war with Germania is coming to an end. Great news that with the casualty figures now approaching half a million that The Great One of Four will shortly announce that unemployment in Hibernia is approaching zero and that a period of calm will settle in before fresh battles commence in Gaul in the autumn … the beer ration is being increased, and a bonus of ten stone of prime Tyronian spuds is being offered to every third child born in the coming year …. Oh Happy Days (-;

  17. christy Says:

    @ John O hagan

    Thanks a million

  18. Joseph Says:

    @David O’Donnell - “The Great One of Four will shortly announce that unemployment in Hibernia is approaching zero and that a period of calm will settle ”

    Sadly, 124 bakers at Galaghers in Donegal are only seeing unemployment today.

  19. Martin Ryan Says:

    A meteorological company that provides weather updates for businesses has dismissed claims that snow was to blame for the dramatic contraction in the (British) economy in the final quarter of 2010:

    http://www.telegraph.co.uk/finance/economics/8282083/Bad-weather-not-to-blame-for-GDP-fall-says-British-Weather-Services.html

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