GDP can be measured in three distinct ways: Output, Expenditure, and Income. The good news The Office for National Statistics (ONS) announced this morning that the UK grew by 0.3% in the three months to June. Then came the economy’s weak 0.1% growth during the July-to-September period. This pro-growth narrative took a sharp turn as the economy contracted by -0.1% just in the month of September.
The Output measure of GDP essentially captures the value of everything produced in our economy. It captures the economic impact of all the services produced throughout all sectors. This includes many key sectors, like agriculture, manufacturing, energy, construction, the service sector, and government operations. Each of these sectors is indispensable and each sector contributes disproportionately in ways that may surprise you to our overall GDP, the driver of productivity and innovation.
The Expenditure measure, as the name suggests, measures the value of all goods and services bought by households and government units. This includes investments in patents and commercial D-oriented buildings, which are key to long-term economic development. The Expenditure or Demand measure considers exports minus imports. All of this provides us a window into how the national economy engages with global markets.
The Income story can be viewed as the snapshot of the bottom line economic activities produced. This is because it mainly captures profits and wages. This aspect of GDP highlights how well individuals and businesses are performing financially, offering insight into living standards and economic prosperity.
ONS has done a great job establishing credibility for getting quick-turnaround GDP estimates out the door. It is mandated to release these figures within 40 days of the end of each quarter, distinguishing it from all other major economies. This important and timely reporting is essential to fostering a current understanding of our nation’s economic trends and conditions. Well actually, because the ONS publishes a pretty unique GDP measure. This measure is the best out of all three approaches—Output, Expenditure, and Income—and offers the most balanced view of economic performance.
Since 2010, the ONS has moved to measure well-being in parallel to traditional metrics that track economic growth. This new initiative understands that economic prosperity is more than just the numbers in an economic impact statement. It balances progress with the quality of life that citizens want to see improved.
According to the latest national accounts, economic growth (measured as GDP) was up just 0.3% for the quarter to June. Analysts are wary about sustained growth, forecasting a paltry 0.2% growth for the next quarter. Instead, the economy grew just 0.1% between July and September. It added even more cause for alarm with a contraction now seen in September itself.
You can bet that economists are following this drop very closely. If GDP goes down for two quarters in a row, it’s a recession, and that has huge consequences for policy-makers and business leaders. The shifts above raise an urgent question into the underlying factors driving consumer sentiment, investment behavior, and government spending priorities.
With the ONS publishing new GDP figures every month, that allows you to keep getting a real-time reshaping of the economic landscape. This ongoing analysis is crucial as it informs decisions at various levels—from household budgeting to corporate investment strategies and government policy formulation.