New Chancellor Rachel Reeves is undoubtedly interested in the IMF’s (International Monetary Fund) recent upward revision to the UK’s economic prospects. However, she expressed concern that “for too many people, our economy feels stuck.” The economic context for the UK proved to be a bit more complicated. It clawed its way to a weak expansion of 0.1% between July and September.
The development numbers come as the UK economy enters a period of difficult growth. This change comes after an extremely strong start to 2025. This comes after the country shocked analysts last quarter with an unexpected growth rate of 0.3%. That rate was way above their target of 0.2%. The IMF downgraded its longer term projection for economic growth in 2025. The updated estimate dwarfs the 1% prediction in March from the Government’s own forecasters – the Office for Budget Responsibility (OBR).
Gross Domestic Product (GDP) serves as a key indicator of economic health and can be measured through three distinct approaches: Output, Expenditure, and Income. Each approach provides unique perspectives on how well the economy is performing.
The Output approach emphasizes the overall value of goods and services created by all sectors in the economy. More than just a measure of capital investment, it paints a picture of the productivity and efficiency of the economy, a portrait of its industrial and commercial muscle.
Instead, the Expenditure approach measures the value of everything paid for by households and governments. Sign up here Investments in industrial machinery and labor-intensive buildings are key. Second, net exports are calculated by taking exports minus imports. This approach permits federal analysts to take the nation’s pulse on consumer and government spending trends, which represents an important engine of economic activity.
The Income approach, as the name suggests, measures the total income in the form of profits and wages produced in that economy. We like this lens because it illustrates who benefits between the various stakeholders in the economy. It also tells us much about the standards of living and working.
In the UK, the Office for National Statistics (ONS) publishes a single measure of GDP that incorporates all three methodologies. You get access to this granular data for 40 days after the end of each quarter! This relatively quick turnaround puts it among the top three – if not the fastest – estimates among all major economies.
Since 2010, the ONS has supplemented its reporting on economic growth with measures of well-being. This shift acknowledges that economic performance should not only be assessed through financial lenses but through its impact on individuals’ quality of life.
External factors have significantly changed the economic landscape. The Covid-19 pandemic in 2020 set off the worst recession the UK has ever experienced in more than three centuries. As we’ve discussed, The Great Recession’s lasting impact continues to color what recovery looks like and what economic policy should be.
Even with all of these positive indicators, there is still an unwavering feeling of apprehensiveness regarding the direction the economy is heading. Unfortunately, Chancellor Reeves’ comments are reflective of a concerning trend. Despite economic indicators signaling a booming economy, people are more anxious or don’t perceive any growth in their pocketbooks.
Yet policymakers and analysts alike are still working to assess these mixed signals. To start, they need to look at both GDP measurements, quantitative data, and qualitative assessments of well-being. This dual focus could give a better picture of what economic health looks like than traditional measures measured in isolation.