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Impact of CPI deflation on pre 1997 GDP estimates

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Impact of CPI deflation on pre 1997 GDP estimates

Issue date: 05 February 2013
Type: Statement

Some gross domestic product (GDP) users have asked ONS about whether the published GDP historic series will be revised in light of the recent article on the modelled Consumer Price Index (CPI) back data. 

At the time of Blue Book 2012, historical GDP data pre-1997 was recalculated by estimating the effects of deflating components of output and household final consumption expenditure (HHFCE) using a top level CPI series. This was in order to bring the estimates into line with the methodological change introduced in Blue Book 2011 for the period since 1997. Producing a CPI before 1987 - where individual price data is unavailable - is extremely challenging and requires some form of modelling using a variety of assumptions.

The Blue Book 2012 historic GDP series derived in this manner remains ONS's best estimate of GDP 1948 to 1997.

Subsequently, further work has been undertaken by ONS, with input from the University of Manchester, to produce a modelled CPI - including an estimate of the formula effect - back to 1950. This is aimed at users interested in price differences between the Retail Price Index and the CPI historically. This work was performed for 12 components of CPI. This modelled CPI remains a 'work in progress', with further analytical work being undertaken following comments received on the article.

In line with all National Statistics, GDP is kept under review for methodological improvements. As part of this continuous improvement we are investigating whether a consistent HHFCE series at the 12 component level can be produced for the period up to 1997, which may further refine the top level estimates of HHFCE used in GDP. Any conclusions from this work would not be ready for implementation until at least Blue Book 2014. Therefore in Blue Book 2013 we will publish the existing historic time series, re-referenced onto 2010=100, as the best estimate of GDP levels and growth in the period from 1948 to the late 1980s. There will be some small methodological revisions to the more recent periods in line with the Blue Book 2013 scoping article.


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