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| How fast is the UK's economy growing and what is GDP? | How fast is the UK's economy growing and what is GDP? |
| (25 days later) | |
| The UK's economy barely grew between July and September, with Chancellor Rachel Reeves saying she is "not satisfied" with the figures for the first three months of the Labour government. | |
| The strength of the economy affects things like pay increases for workers and the amount of tax the government can raise to pay for services. | The strength of the economy affects things like pay increases for workers and the amount of tax the government can raise to pay for services. |
| What is GDP and how is it worked out? | What is GDP and how is it worked out? |
| GDP is a measure of all the economic activity of companies, governments and people in a country. | GDP is a measure of all the economic activity of companies, governments and people in a country. |
| In the UK, new GDP figures are published every month. However, quarterly figures - covering three months at a time - are considered more important. | In the UK, new GDP figures are published every month. However, quarterly figures - covering three months at a time - are considered more important. |
| Most economists, politicians and businesses like to see GDP rising steadily. | Most economists, politicians and businesses like to see GDP rising steadily. |
| That's because it usually means people are spending more, extra jobs are created, more tax is paid and workers get better pay rises. | That's because it usually means people are spending more, extra jobs are created, more tax is paid and workers get better pay rises. |
| When GDP is falling, it means the economy is shrinking - which can be bad news for businesses and workers. | When GDP is falling, it means the economy is shrinking - which can be bad news for businesses and workers. |
| If GDP falls for two quarters in a row, that is known as a recession, which can lead to pay freezes and job losses. | If GDP falls for two quarters in a row, that is known as a recession, which can lead to pay freezes and job losses. |
| What is happening to the UK economy? | What is happening to the UK economy? |
| The UK fell into recession at the end of 2023, when the economy shrank in the last two quarters of the year. | The UK fell into recession at the end of 2023, when the economy shrank in the last two quarters of the year. |
| It rebounded strongly in the first three months of the year, when GDP increased by 0.7%, and this was followed by 0.5% growth between April and June, external. | |
| However, it barely grew between July and September, with uncertainty about the Budget in October being blamed for the weak growth. | |
| The economy expanded by just 0.1% over the three-month period, and shrank during September itself. | |
| Budget 2024: Key points at a glance | |
| However, ahead of the Budget, the International Monetary Fund (IMF) raised its growth forecast for the UK. | However, ahead of the Budget, the International Monetary Fund (IMF) raised its growth forecast for the UK. |
| The influential global organisation now expects the UK to grow by 1.1% in 2024, up from the 0.7% it forecast three months ago. | The influential global organisation now expects the UK to grow by 1.1% in 2024, up from the 0.7% it forecast three months ago. |
| While slow compared to previous periods, this would put the UK in the middle of the pack of the world's leading nations. | While slow compared to previous periods, this would put the UK in the middle of the pack of the world's leading nations. |
| The IMF and UK government have disagreed over previous predictions, and economic forecasts are not always accurate. | The IMF and UK government have disagreed over previous predictions, and economic forecasts are not always accurate. |
| How much money does the UK government raise and spend each year? | How much money does the UK government raise and spend each year? |
| Where does the government borrow billions from? | Where does the government borrow billions from? |
| How does GDP affect me? | How does GDP affect me? |
| If GDP is going up steadily, people pay more in tax because they're earning and spending more. | If GDP is going up steadily, people pay more in tax because they're earning and spending more. |
| This means more money for the government, which it can choose to spend on public services, such as schools, police and hospitals. | This means more money for the government, which it can choose to spend on public services, such as schools, police and hospitals. |
| When the economy shrinks and a country goes into recession, these things can go into reverse. | When the economy shrinks and a country goes into recession, these things can go into reverse. |
| Governments tend to get less money in tax, which means they may decide to freeze or cut public spending. Or taxes may rise. | Governments tend to get less money in tax, which means they may decide to freeze or cut public spending. Or taxes may rise. |
| In 2020, the Covid pandemic caused the most severe UK recession for more than 300 years, which forced the government to borrow hundreds of billions of pounds to support the economy. | In 2020, the Covid pandemic caused the most severe UK recession for more than 300 years, which forced the government to borrow hundreds of billions of pounds to support the economy. |
| How is GDP measured? | How is GDP measured? |
| GDP can be measured in three ways: | GDP can be measured in three ways: |
| Output: The total value of the goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government | Output: The total value of the goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government |
| Expenditure: The value of goods and services bought by households and by government, investment in machinery and buildings - this also includes the value of exports, minus imports | Expenditure: The value of goods and services bought by households and by government, investment in machinery and buildings - this also includes the value of exports, minus imports |
| Income: The value of the income generated, mostly in terms of profits and wages | Income: The value of the income generated, mostly in terms of profits and wages |
| In the UK, the ONS publishes one single measure of GDP, which is calculated using all three measurements. | In the UK, the ONS publishes one single measure of GDP, which is calculated using all three measurements. |
| But early estimates mainly use the output measure, using data collected from thousands of companies. | But early estimates mainly use the output measure, using data collected from thousands of companies. |
| Why does the GDP figure often change? | Why does the GDP figure often change? |
| The UK produces one of the quickest estimates of GDP of the major economies, about 40 days after the quarter in question. | The UK produces one of the quickest estimates of GDP of the major economies, about 40 days after the quarter in question. |
| At that stage, only about 60% of the data is available, so the figure is revised as more information comes in. | At that stage, only about 60% of the data is available, so the figure is revised as more information comes in. |
| The ONS publishes more information about this on its website, external. | The ONS publishes more information about this on its website, external. |
| What are the limitations of the GDP figure? | What are the limitations of the GDP figure? |
| GDP doesn't tell the whole story: | GDP doesn't tell the whole story: |
| Hidden economy: Unpaid work such as caring for children or elderly relatives isn't captured | Hidden economy: Unpaid work such as caring for children or elderly relatives isn't captured |
| Inequality: GDP growth also doesn't show how income is split across a population - rising GDP could result from the richest getting richer, rather than everyone becoming better off | Inequality: GDP growth also doesn't show how income is split across a population - rising GDP could result from the richest getting richer, rather than everyone becoming better off |
| What is GDP per capita? | What is GDP per capita? |
| Just because GDP is increasing, it doesn't mean that an individual person's standard of living is improving. | Just because GDP is increasing, it doesn't mean that an individual person's standard of living is improving. |
| If a country's population increases, it pushes GDP up, because with more people, more money will be spent. | If a country's population increases, it pushes GDP up, because with more people, more money will be spent. |
| But individuals within that country might not be getting richer. They may be getting poorer on average, even while GDP goes up. | But individuals within that country might not be getting richer. They may be getting poorer on average, even while GDP goes up. |
| The ONS also publishes a figure for GDP per capita - or head of population - which can tell a different story. | The ONS also publishes a figure for GDP per capita - or head of population - which can tell a different story. |
| In fact, when you strip out inflation and population growth, the latest quarterly figures show that in the third quarter of 2024, GDP per capita fell by 0.1%, external. | |
| Official GDP figures don't take into account unpaid work like looking after children | Official GDP figures don't take into account unpaid work like looking after children |
| Some critics also argue that GDP doesn't take into account whether the economic growth it measures is sustainable, or the environmental damage it might do. | Some critics also argue that GDP doesn't take into account whether the economic growth it measures is sustainable, or the environmental damage it might do. |
| Alternative measures have been developed which try to capture this. | Alternative measures have been developed which try to capture this. |
| Since 2010, the ONS has also measured well-being, external alongside economic growth. This assesses health, relationships, education and skills, as well as people's personal finances and the environment. | Since 2010, the ONS has also measured well-being, external alongside economic growth. This assesses health, relationships, education and skills, as well as people's personal finances and the environment. |
| But despite its limitations, GDP is still the most widely-used measure for most government decisions and international comparisons. | But despite its limitations, GDP is still the most widely-used measure for most government decisions and international comparisons. |