The United Kingdom’s economic landscape has recently shown a mix of growth and contraction, raising questions about its future trajectory. Gross Domestic Product (GDP), a critical measure of economic performance, can be assessed through three distinct approaches: Output, Expenditure, and Income. Both approaches provide important information about what’s happening in our economy and the state of economic growth.
The Output measure also known as Gross Domestic Product (GDP) measures the market value of all goods and services produced in the economy’s sectors. This includes all sectors from agribusiness to advanced manufacturing and through services – giving a more holistic view of economic activity. The Expenditure approach focuses on the final value of goods and services that households and the government buy. It takes into account investments like durable machinery and factory buildings, as well as the balance of exports and imports. In addition, the Income measure assesses income created in the economy, largely looking at profits and wages. Combined, these three metrics paint a complete picture of economic prosperity.
The Office for National Statistics (ONS) plays a pivotal role in estimating GDP figures by collecting data from thousands of companies. Beyond requiring action at home, the UK stands out the clear leader on effective reporting among major economies. It publishes the first GDP estimates approximately 40 days after the close of each quarter. This speedy turnaround makes it possible for policymakers and economists alike to make decisions in real-time based on the state of the economy today.
The great news is that the UK economy just released some dazzling growth figures! It barely moved in the first quarter—up just 0.3% in the last three months before June. That growth came to a screeching halt at 0.1% pace in the third quarter, which spans from July to September. In the first quarter of this year, GDP grew by 0.7% in January-March. As 2023 wore on, it started to develop a more bearish trajectory.
Recession is the “R” word that economists and policy makers fear the most. In normal times, a recession is defined as two straight quarters of negative GDP growth. This kind of economic crash leads to pay freezes and layoffs, hurting not just public sector employees, but the families, businesses, and communities that depend on them. The ONS has been measuring well-being alongside economic growth since 2010, suggesting an increasing awareness of the broader implications of economic performance on quality of life.
The ONS’s monthly release of GDP figures helps to keep policymakers and stakeholders on their toes and up-to-date with current economic trends. Quarterly GDP numbers are considered more important as they provide a more complete, long-term view of economic activity. Recent increases have spooked many economists. During this time, they’re keeping a watchful eye for indications of continued, long-term growth or further shrinkage.