In the balance – How we are improving our estimates of GDP
Over several years the ONS has been transforming the way we produce GDP and wider national accounts figures, introducing better data sources, systems and methods to produce significantly improved estimates of how money flows around the economy. Here Craig McLaren explains why new figures that will be used from the autumn look a little different to previous estimates.
Today we’re releasing new, indicative, estimates of how GDP figures will look when we publish our annual Blue Book publication in September 2021. These new data mark the culmination of several years of transformation, following the publication of the Bean Review into improving the measurement of economic statistics.
These figures look a little different, and for a few reasons. Firstly, we’ve introduced a new Financial Services Survey (FSS), giving us better information about this significant industry. Data from this new survey shows the industry – and therefore GDP as a whole – grew a little more in recent years than we previously estimated.
In addition, we have introduced new ways of removing the effects of price changes in both the telecoms and clothing industries. These mean ‘real’ GDP (where we’ve removed the impact of price changes) grew a little less than we previously estimated in the years before the financial crisis and a little more in the years after it.
Finally, we have enhanced the way we bring together our various sources, balancing them in both cash and real terms simultaneously. We’ve also used new surveys on what companies spend their money on and what goods and services they produce to help us produce our most coherent and high-quality set of national accounts yet.
The new estimates will also include the introduction of the much anticipated ‘double deflation’, which separately removes the effects of prices changes from a businesses’ costs and what the business produces.
This last change means that although revisions for the overall economy are relatively modest, in real terms, how industries have grown in the past will look quite different in some cases.
The changes I have outlined also have a knock-on impact on productivity. With the economy growing slightly less before the financial crisis and slightly more after, the size of the so-called ‘productivity puzzle’ (where productivity was seen to grow much more slowly in recent years than before 2008) is now around a quarter smaller. Much of this improved productivity has come from the telecoms industry, thanks to our improved measurement of price changes in this sector. However, several areas of manufacturing are now also seeing higher productivity growth, while many services are growing less quickly.
While this year’s Blue Book marks the culmination of several years’ hard work, we will continue to work on improving these figures further in the future – including introducing improvements to how we measure global supply chains – to ensure we continue to produce world-leading GDP statistics.