Gross Domestic Product (GDP) is widely regarded as the key measure of economic activity. There are different measures of GDP, including nominal GDP, which measures the final market value of all goods and services produced in an economy. Nominal GDP is appropriate for comparing the relative size of the UK economy to others in a given year.
The UK has the world’s eighth largest economy in nominal GDP-terms
The UK was the world’s eighth largest economy in 2012 in nominal GDP terms1; with the US – the world’s largest economy - producing $16.2 trillion of output in 2012, just over seven times that of the UK ($2.3 trillion)2. The decade prior to 2012 saw the rapid emergence of the BRIC economies - Brazil, Russia, India and China. Annual GDP growth in China averaged 12.7% per annum over this period, with the economy consequently establishing itself as the second largest in the world, producing $12.3 trillion of output in 2012. Brazil, Russia and India also achieved similar rates of expansion and all have now achieved a higher level of economic output compared with the UK.
The UK has the fourth highest GDP per capita in the G7
When making cross-country comparisons, the population of each economy should also be considered. Therefore nominal GDP per capita – calculated by dividing GDP by the resident population – can be an informative measure of economic performance. The US has the highest GDP per capita ($51,708) among G7 and BRIC countries, but UK GDP per capita ($36,333) compares well against the remaining G7 economies (see Figure 1) and is higher than all of the BRIC economies.
Figure 1: Nominal GDP per capita in the G7 and BRIC economies ($PPP; 1997 and 2012)
- Source: IMF
During the downturn, the UK saw one of the largest falls in real GDP among G7 countries
Nominal GDP does not adjust for price changes in these goods and services, which can distort underlying changes in the amount produced or consumed. GDP can therefore also be measured in real terms, which removes the impact of price changes. This measure is appropriate for making cross-country comparisons over time.
In the decade prior to the economic downturn, UK annual real GDP compared favorably with other G7 economies, averaging 3.2% compared with a G7 average of 2.5%. However, following the 2007 global financial market shock, UK real GDP fell by 7.2% between the beginning of 2008 and the middle of 2009, the joint second largest fall in the G73.
GDP in real terms grew slowly following the downturn but growth has since accelerated
The subsequent economic recovery has been the slowest in post-war history and has also been one of the weakest in the G7 (Figure 1). UK real GDP increased by just 1.2% per annum between 2009 and 2013, the third lowest rate in the G7, and remains 0.6% below its pre-downturn peak while all other major economies have surpassed this milestone, with the exception of Italy.
That said, throughout 2013 and in the first quarter of 2014, the UK has moved from having one of the slowest growth rates in the G7 to one of the fastest. GDP has risen by 3.1% over the year compared with growth of 2.3% in Germany and 2.0% in the US.
Figure 2: Real GDP in the G7 economies (2008=100)
- Data have been obtained from OECD for all countries to Q1 2014 with the exception of Canada, for which data are currently only available to Q4 2013.
- Source: OECD
Where can I find more information on GDP?
The international statistics presented in this story are based on data published in the OECD Quarterly National Accounts and the IMF World Economic Outlook database. UK GDP data can be downloaded from the economy section of the ONS website. If you have any comments or suggestions, we’d like to hear them. Please email us at: email@example.com.
Here nominal GDP is measured in Purchasing Power Parity (PPP) terms, which is commonly used to compare the economic performance of different countries. This converts GDP in national currency terms into a common currency (in this case the US dollar), using a PPP exchange rate. This is the rate at which a country’s currency would have to be converted in order to buy a representative basket of goods and services in the US. These PPP exchange rates can differ to those occurring in financial markets; they are typically less volatile and encapsulate goods that are both traded and not traded.
Figures quoted in this section are based on IMF data. Methodological differences between these data and ONS published GDP figures may occur, in order to maintain comparability across countries.
Data used in this section are from the Organisation for Economic Co-operation and Development (OECD), which use information provided by ONS to calculate data series for the UK.