UK knocked off top spot: Germany is now Europe's fastest growing economy

 
Peter Spence
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Growth in Merkel's Germany appears to have overtaken the UK's (Source: Getty)

Germany's economy is growing faster than the UK's economy, although not by a lot.

For a while, it looked like the race between the UK and Germany was neck-and-neck in the first three months of 2014. But new figures, published by the Office for National Statistics today, show Germany is edging ahead.

German growth data for the first quarter of 2014 was shockingly good. GDP grew by 0.8 per cent in the first quarter of the year, according to official estimates released by Destatis. A nice surprise, as consensus estimates suggested we'd see an increase of just 0.7 per cent.

For the UK's government, the figures could come as a bit of a blow. It'll no longer be able to claim that the UK is Europe's fastest growing developed economy. At best, it would be able to say that the UK's growth is joint fastest. The ONS' preliminary estimate of growth also came in at 0.8 per cent for the first three months of 2014.

But both of those growth figures have been rounded, to one decimal place. Peering at the unrounded estimates reveals that Destatis' estimate for German quarterly GDP growth, on a seasonally and calendar adjusted basis, is actually 0.817923186344245 per cent.

We knew that back when the numbers came out, on 15 May. For the UK equivalent, we had to wait for today's second estimate of GDP from the ONS. While the first estimate of growth was based entirely on the output side of the economy, this second release incorporates what’s going on on the expenditure side.

The unrounded estimate for first quarter UK growth is found by comparing the ONS' estimates for seasonally adjusted GDP at market prices across quarters. That data came in at £387.138bn for the last quarter of 2013, and £390.257bn for the first three months of this year - an increase of 0.805655864317117 per cent.

If you're keeping up, that means you need to take growth to just two decimal places to see that Germany is growing faster, taking pole position. So why don't these releases give precise estimates more prominence?

Largely because GDP estimates aren't all that accurate, and are often subject to sweeping revisions. So much so that analysts aren't too surprised to see changes large enough to move quarterly growth numbers by enough to shift headline numbers, even when taken to a smaller degree of accuracy.

In a preview of today's second estimate, IHS Global Insight's Howard Archer suggested that the UK's first quarter growth could be revised up to 0.9 per cent, on the back of strength in the service sector. The Bank of England agrees, with its staff expecting that the mature estimate for the first quarter will be revised up to 0.9 per cent.

Still, both economies remain far behind Japan, which posted growth of 1.5 per cent in the first quarter of the year, to become the G7's fastest growing economy in the first three months of 2014. All hail Abenomics.