Skip to content

Continuous Improvement of Gross Domestic Product: Sources, Methods and Communication This product is designated as National Statistics

Released: 29 May 2014 Download PDF

Abstract

This article is part of the series of articles launched on 14 September 2012, which intend to keep users informed of statistical continuous improvements being carried out across the Office for National Statistics (ONS). A previous article, published on 24 October 2012 brought together into a single action plan, a number of distinct activities that were planned in the context of continuous improvement to gross domestic product (GDP) sources, methods and communication and promised that progress would be reported every six months. The first such update was published on 24 April 2013, with a second update in November 2013. This is the third. This programme is wholly separate from the wider programme of changes to the National Accounts, which will take effect later this year in the Blue and Pink Books 2014. Those changes concern the overall structure and presentation of GDP and will reflect significant changes to the international standards adopted by all European Union (EU) Member States as well as other improvements designed to ensure that the UK National Accounts continue to provide a reliable framework for analysing the UK economy and comparing it with other countries. The Continuous Improvement of GDP programme will continue beyond Blue and Pink Books 2014.

1. Introduction

As part of the ONS commitment to produce trusted statistics of high quality, ONS continuously reviews and improves data sources, methods and systems.  This also assists users in their understanding of the quality of the statistics, their fitness for purpose and their relevance.  Previous articles (Jones and Walker, 2012, Jones, 2013 and Lee et al, 2013) presented a range of continuous improvement work being undertaken in relation to producing estimates of quarterly and annual GDP.  This article reports progress on the work identified and highlights some additional areas for improvement that have arisen in the last six months.

2. Background to the compilation of gross domestic product

GDP is an integral part of the United Kingdom’s (UK) national accounts and provides a measure of the total economic activity in the country. GDP is often referred to as one of the main 'summary indicators' of economic activity with GDP growth being the growth between two consecutive quarters.  A brief description of how GDP is compiled was included in a previous article (Jones and Walker, 2012).

3. Reviewing and improving GDP source data and methods

The sections below provide an update on the areas that we previously indicated would be subject to review. The review areas can be broadly categorised into five main headings:

  • source data

  • GDP compilation methods

  • addressing GNI reservations

  • assessing quality

  • improving dissemination and user understanding.

This article concentrates on the first of these, as many of the other areas will now be covered in the regular updates to the National Accounts work plan.

3.1 Source data

3.1.1 Index of Services industry reviews

Six industries are currently under review as part of the programme to consider concepts, methods and data sources, which support the short-term estimates of the output approach to GDP (GDPO). Subject to consultation with users this summer, the reviews of the following industries:

  • real estate (Standard Industrial Classification 2007, division 68)

  • public administration (division 84)

  • health (division 86).

will conclude in September. This will allow the recommendations to be included in Blue Book 2014 where appropriate.

It is planned that the remaining three reviews will be finalised during 2015:

  • financial services (divisions 64 and 66) is planned to conclude in September 2015

  • property developers (division 41.1) in April 2015

  • water transport (division 50) in April 2015.

The reviews of social care (divisions 87 and 88) and professional services (divisions 69 to 75) will commence in June 2014, at which point 39% of GDPO will be under active review. These reviews will conclude in 2015.

Table 1, summary of industry review schedule

Industry GDP weight (1000) Commence Consult Finalise
68 real estate 96.9 Dec 2012 Jun 2014 Sep 2014
41.1 property developers 9.7 Jun 2013 TBC Apr 2015
86 health 55.2 Dec 2012 Jun 2014 Sep 2014
64 & 66 financial services 79.5 Feb 2013 Mar 2015 Sep 2015
84 public administration 53.5 May 2013 Jun 2014 Sep 2014
50 water transport 3.0 Apr 2014 Dec 2014 Apr 2015
87-88 social care 20.5 Jun 2014 Dec 2014 Apr 2015
69-75 professional services 68.6 Jun 2014 Mar 2015 Jul 2015
  386.8      

Download table

Wider improvements

The delivery of re-based Producer Price Index and Service Producer Price Index data has been completed and an article is planned for end June/early July. In addition, the assessment of new turnover estimates from the Monthly Business Survey for real estate (division 68.3), vets (division 75), market sector health (part of division 86), market sector culture (part of division 91) and market sector sport (part of division 93) have been completed and these will replace the current data sources within the Index of Services from Blue Book 2014.

Progress on industry reviews and wider improvements will be discussed in more depth in the GDPO Improvement Report, which will be published in September 2014 alongside the Quarterly National Accounts consistent with Blue Book 2014. Further insight will be provided at 'Improvements to the Output Approach to GDP', an ONS seminar to be held at The Queen Elizabeth II Conference Centre, London on 19 June 2014. Please contact Anna Donabie (anna.donabie@ons.gsi.gov.uk) for further details.

3.1.2 Experimental series within the Index of Services

As part of their recent assessment of the Index of Services, the UK Statistics Authority asked ONS to clarify how the experimental status of 17 industries will be removed and to outline a timetable on how this will be progressed. In light of this request, the timescale for the movement of all industries to National Statistics status is being accelerated from that outlined in the November 2013 article.

Nine of the experimental industries will be under review at June 2014 and changes to the status of these industries will not be sought until the conclusion of each review. The industry review timetable outlined above means that the experimental status of real estate (division 68) and health (division 86) will be addressed in September 2014, while water transport (division 50), financial services (division 64), financial intermediation (division 66), scientific research and development (division 72), vets (division 75), residential care activities (division 87) and social work activities without accommodation (division 88) will be addressed during 2015.

A further eight industries are not yet subject to an industry review. ONS judges that the current methodologies and data sources for these industries are of an acceptable standard and in September it will begin a consultation on the status of programming and broadcasting activities (division 60), computer programming (division 62), information services (division 63), insurance and pension funding (division 65), rental and leasing activities (division 77), services to building and landscaping activities (division 81), membership organisations (division 94) and households as employers of domestic personnel (division 97).

By spring 2016, it is planned that the 17 experimental industries will have been subject to a consultation on whether they should become National Statistics.

3.1.3 Construction survey review

Responsibility for running the quarterly construction survey transferred to ONS in 2008.  Following the transfer, a methodological review was carried out on the quarterly survey with the objective of changing its frequency to monthly to meet the need for monthly estimates of construction output to feed into GDP.  Following the methodological review and redevelopment work, the redesigned monthly construction survey was introduced in 2010.

In line with good practice and in accordance with the principles in the UK Code of Practice for Official Statistics, a post implementation methodological review was commenced in July 2012 focusing on the following areas: sample design and estimation, data collection, and deflators.  In February 2013, work also commenced to look at the feasibility of seasonally adjusting the new, young (3 years) construction data series.

The following sections provide an overview of the areas reviewed and subsequent decisions.

Sample design and estimation review

As reported in the last GDP improvements article, the sample design and estimation review concluded that improvements could be made to the coefficients of variation through several methods.  The chosen approach was to change the survey’s stratification to introduce a sixth stratum of 5-9 employees.  This was implemented in February 2014 and has had no impact on published data.  However, over time users can expect fewer issues surrounding sample rotation than have been seen in already published construction data.

Deflators

Construction volume estimates are produced using construction prices indices (deflators) from the Building Cost Information Service (BCIS).  The contract for the supply of these indices was awarded to Aecom in July 2013 who has used the opportunity to review, and where relevant improve, the methodology for these indices.  In the meantime Aecom have subcontracted BCIS to ensure the continuous delivery of construction price indices.  The methodological improvements will be discussed at a Construction prices seminar on 19 June 2014 and will be accompanied by an article explaining the improvements and outlining the implementation plan.

Seasonal adjustment of monthly consruction data

Seasonally adjusted monthly construction data have been available since June 2013.  Due to the immaturity of the monthly series, first introduced in 2010, seasonal adjustment has been the cause of many of the revisions to construction data since its introduction.  A review of both the seasonal adjustment method and parameters used will commence shortly.

3.1.4 Retail Sales Index (RSI)

The RSI work plan for 2014 was published on 20 March 2014 providing users with information on the methodological work plan for retail sales and Internet sales statistics. The plan includes a list of all regular updates that take place on an annual basis and as well as describing the change it provides an assessment of the impact on RSI time series data. The plan also provides information on further development and research that will be undertaken in the next calendar year as well as planned articles on retail sales.

3.2 Improving dissemination and user understanding

Work has continued to improve the commentary and presentation in the GDP and associated statistical bulletins.

In addition to this, work has continued on developing additional statistical products such as podcasts, short articles and infographics, which can be accessed via the recently launched ONS Economy Theme page.

We are keen to receive feedback on our existing statistical products and any suggestions for improvements or new products that will assist users in using and understanding the GDP estimates.

Please contact pete.lee@ons.gsi.gov.uk if you have any feedback or suggestions for improvements.

4. Emerging issues

4.1  National Accounts Work Plan

This article gives an indication of the extent of the work being undertaken in support of the continuous improvement of GDP.  While this work is, in itself, important, it is only one element of a much wider programme of developments for National Accounts statistics and other related outputs, such as Public Sector Finance Statistics.  To meet wide ranging user needs, and to ensure that developments are effectively prioritised, ONS produced a draft National Accounts and Related Outputs work plan in May 2013, and engaged in a full user consultation exercise.  The results of this exercise enabled ONS to produce a final version of the National Accounts and Related Outputs Work Plan 2013/14 - 2017/18.

ONS will report progress on this work plan in the autumn and the spring each year.  ONS will consult on an update to the Work Plan in 2014 and will look to re-prioritise where possible in line with the recommendations of the National Statistics Quality Review for National Accounts and Balance of Payments, which will be published in the near future. The progress reports will also become the means by which ONS will report future progress on the continuous improvement of GDP programme of work.

Concluding comments

This article reports progress on the programme of work being undertaken  in ONS to support the continuous improvement of the outputs approach to measuring GDP.  More detailed articles on particular aspects will be published as the work progresses and a further overall summary article published in Autumn 2014.

For an overview of the wider changes reforms to the National Accounts please see this article.

Background notes

  1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Content from the Office for National Statistics.
© Crown Copyright applies unless otherwise stated.