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UK: Still Raining• The UK’s past income and savings behaviourhas been revised by the ONS. Real disposableincome is now estimated to have risen in 2010, ifonly just. And the UK savings rate has beenrevised up significantly.• Combined with weak but positive realincome growth in 2012, scope for households toease back on their rate of saving should providesome room for consumption growth in thesecond half of 2012.Chart 1: Household Disposable Income Growth(% y/y)20151050Impact of inflationOtherTaxes and benefitsNet property incomeCompensation of employees• Still, there are lots of bridges to cross beforethen and the near-term outlook is bleak. Weexpect GDP to contract in Q4 2011.-5-102006 2007 2008 2009 2010More revisions to economic historyThis week saw the Office for National Statistics(ONS) release further information on the UK’sfinancial and economic accounts, followingsignificant methodological changes put in place inthe context of the ONS ‘Bluebook 2011’ revisionexercise. We have already seen some impact fromthese changes in downward revisions to the Q2 2011growth estimate, to 0.1%, and also the revision to theoverall level of GDP which saw the fall in output overthe 2008/9 recession revised to 7.1% rather than theprevious estimate of 6.4%.But in contrast to the fairly negative news from theearlier release of the revised series, this week’s datacontained some more positive reinterpretations ofhistory.The revised data provide new estimates forhousehold’s real disposable income growth in recentyears. While these continue to show that growth inreal disposable income has been depressed, thesituation is not so severe as previously estimated. Sothe previous estimate suggested that real disposableincome had fallen by 0.8% in 2010, which wouldhave been the first annual fall in more than 30 years.Now, however, in a reminder never to place toomuch credence on any particular set of statistics, thatdecline has been revised. Upward revisions to theestimate of net property income and a downwardrevision to the estimate of the deflator over theperiod now shows the annual change in realdisposable income as having grown 0.1% in 2010.The 2009 real disposable income figures have alsobeen revised up to show growth of 1.6%, up from1.1% in the previous estimate. In the latest quarter,Q2 2011, the data show a surprising 1.2% q/q rise inSource: Office for National Statistics1086420Chart 2: Savings Rate (%)Latest DataPrevious Estimates-22005 2006 2007 2008 2009 2010 2011Source: Office for National Statisticsreal disposable income. But that does not reflect amarked pick-up in wages and salaries, which rose0.5%. Rather, it appears a 2.8% rise in socialbenefits is partly responsible.In the bigger picture the data does not really changethe story that household disposable income growth isbeing held back by high inflation. In the year to Q22011, total household real income growth has fallenby 1.2%. Within that, while nominal income hasgrown by 3.2%, high inflation has eroded the realvalue of that increase.A higher savings rate may give more upside toconsumption next yearThe earlier release of the Q2 2011 GDP datashowed a downward revision to the level ofconsumption over the last few years. And whencombined with the new income release, the result isDavid Tinsley 27 October 2011Market Mover16www.GlobalMarkets.bnpparibas.com