Today the ONS has published new GDP figures including numerous improvements to our data sources and methods. Craig McLaren talks about the years of work that have led to this point and how these are the best set of GDP figures yet produced.
Today’s GDP figures are the culmination of several years of improvements and marks a step change in how we produce our data. Over recent years we’ve introduced a number of improvements, including the use of VAT data and better estimates of the income of the self-employed.
The statistics released today include improved estimates of the work of the financial sector, better information on the costs facing businesses, and what is produced by the services sector. But on top of that, we’ve introduced an entirely new system for calculating and compiling the numbers. This includes the introduction of double deflation, which improves our estimates of volume measures of GDP.
Double deflation involves separately removing the effects of inflation from both the costs businesses face and goods and services they produce. While this has little impact on overall GDP, it helps us paint a much better picture of how industries have grown over time in real terms.
Part of introducing double deflation has involved us introducing better ways of recording price changes. This had a particularly stark effect in the telecoms industry, where our new, quality adjusted figures showed the industry grew much quicker than we previously estimated. Therefore, as other industries were using more telecoms services than we previously showed, this has conversely pulled down the growth in many other services.
The new Financial Services Survey, included in headline figures for the first time today, showed that in recent years the sector grew more strongly than we previously thought.
All of these changes to methods and data sources have fed through to produce stronger productivity growth since the financial crisis, and slightly slower growth in the decade before.
This has reduced the size of the so-called ‘productivity puzzle’, a phenomenon which saw productivity growing at a much slower rate than historical trends since 2008. The broad sectors driving the slowdown in productivity growth are largely unchanged, although the telecoms industry is no longer a major contributor.
All of these changes brought together mark a significant step change in how we produce GDP, creating our best estimates yet. But the changes don’t stop here. In the years to come we will be introducing new data sources to improve our estimates of the insurance and pensions sectors, further survey improvements to figures on trade in services and even more improvements to the way we adjust for price changes to ensure that the UK continues to produce GDP figures of world-leading quality.