Measuring the UK\'s economic activity

Gross Domestic Product (GDP) is an integral part of the UK national accounts and provides a measure of the total economic activity in a region. GDP is often referred to as one of the main \'summary indicators\' of economic activity and references to \'growth in the economy\' are quoting the growth in GDP during the latest quarter.

In the UK three different theoretical approaches are used in the estimation of one GDP estimate.

GDP from the output or production approach - GDP(O) measures the sum of the value added created through the production of goods and services within the economy (our production or output as an economy). This approach provides the first estimate of GDP and can be used to show how much different industries (for example, agriculture) contribute within the economy.

GDP from the income approach - GDP(I) measures the total income generated by the production of goods and services within the economy. The figures provided breakdown this income into, for example, income earned by companies (corporations), employees and the self employed.

GDP from the expenditure approach - GDP(E) measures the total expenditures on all finished goods and services produced within the economy.

The estimates are \'Gross\' because the value of the capital assets actually worn away (the \'capital consumption\') during the productive process has not been subtracted.

Estimates for GDP cover calendar years and quarters and the publication dates are available well in advance. Annual estimates are published in late summer as part of the UK National Accounts. Quarterly estimates are published more frequently and are updated with more information as it becomes available each month.

For example, GDP estimates for the first quarter of the year - Q1: January, February and March - will become available:

- 1st estimate: Preliminary estimate of GDP - based on information on output - published 3.5 weeks after the end of the quarter. Provides the first estimate of growth in GDP.

- 2nd estimate: Output Income and Expenditure - based on information from all approaches - published eight weeks after the end of the quarter. Provides information on the level of GDP as well as the growth in GDP.

- 3rd estimate: UK National Accounts - the full national accounts - published 12 weeks after the end of the quarter.

CPI Inflation Rises
Jan CPI up to 1.4%; RPI down to 2.6%

Annual inflation rates - 12 month % change

Reductions last year in charges for financial services, which have not been repeated this year, helped push overall CPI inflation – the Government’s target measure – up to 1.4% in January, from 1.3% in the previous month.

The upward effect from financial services was mainly due to bank overdraft charges, which were unchanged this year but fell a year ago.

A further upward effect came from clothing and footwear, where seasonal price reductions on women\'s outerwear were not as great as last year, and relatively more of the replacement stock came in at higher prices. Another upward influence came from air fares, which fell by less than last year.

The main downward influence came from cultural services due to changes in subscription fees for satellite and digital television, and lower rental charges for televisions and videos. There were also downward effects from petrol prices, which rose by less than last year, and food, mainly due to vegetable prices rising by less than last year, reflecting good supplies for salad items.

RPI inflation by contrast fell to 2.6% in January, down from 2.8% in December. The RPI all-items annual rate excluding mortgage interest payments (RPIX) also fell, to 2.4% in January, down from 2.6% in the previous month.

The main downward influence on the RPI was January\'s decrease in air fares, which were included in the RPI for the first time during 2003. Other large downward effects came from leisure services, and housing, where house prices used to calculate depreciation - the amount homeowners need to spend to maintain their property - rose by less than a year ago. Partially offsetting upward effects came from clothing and footwear, and household goods, particularly furniture, where prices fell by less than last year.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate has been among the lowest in the EU since the start of 2000. The EU 15 average inflation