The R Word: Decoding ‘recession’ and looking beyond GDP.

With news headlines proclaiming the UK has ‘narrowly avoided a recession’, we decode the ‘r’ word and explain why this sometimes misleading term is one the ONS is often cautious to avoid. We get the lowdown on GDP (Gross Domestic Product); discuss whether its time as the yardstick for measuring the success or failure of the world’s economies is coming to an end; and hear how the ONS is already looking well ‘Beyond GDP’ and introducing broader measures of social wellbeing and the environment to provide us with a more holistic view of how society is faring.

Joining Miles is ONS Director of Economic Statistics, Darren Morgan, Chief Economist, Grant Fitzner; and Director of Public Policy Analysis, Liz McKeown.

Links

• Latest GDP data
• Measures of National Well-being
• Beyond GDP

Transcript

MILES FLETCHER

Welcome again to Statistically Speaking the official podcast of the UK’s Office for National Statistics. I'm Miles Fletcher, and this time, we're going to talk about a very famous and long running statistic that’s still regarded as the single most important economic indicator of them all. I'm talking of course about GDP (Gross Domestic Product), the expansion or contraction of which is the yardstick against which the success or failure of the world's economies is measured. It's been around a long time, since around the time of the Second World War, in fact, but is its pre-eminence now coming to an end? GDP misses some things out - that which matters, as was once memorably claimed. So we'll be talking about how the ONS has been updating GDP to keep it relevant and developing new complementary measures of economic and social wellbeing that could perhaps, in future, supplant GDP itself. And in the current economic climate, we cannot avoid the “R” word. What exactly is a recession? How much does it actually matter, if it's only a technical one? Is it the difference between economic disaster and salvation? Spoiler alert, it really isn't.

Anyway, we have a panel of top ONS folk to explain it all: Darren Morgan is director of economic statistics production and analysis, Grant Fitzner is Chief Economist and director of macro-economic statistics and analysis, and also with us is Liz McKeown, Director of Public Policy Analysis, who is leading the drive towards these broader measures on social and economic welfare.

Welcome, everyone.

Darren to start with you. You are responsible for the production of the UK’s GDP estimates. So let's start by reminding ourselves what precisely it measures, it's basically seeking to put a value on all economic activity over a given period.

DARREN MORGAN

Yeah, so we look at GDP and we measure the economy in three different ways. First of all, we do it via what you call the output approach, and most simply, that's everything that's produced in the economy, and that can be cars rolling off the production line, that can be a lawyer providing advice as a service, and it can be public services as well. So surgeries, GP appointments and so on. So everything we produce in the economy. We also look at measuring the economy, everything that is spent, so that could be you and I in household, spending money in the shops or on leisure activities. It can be businesses spending money on goods and services. And it can also mean the government spending money, so everything we spend as well. And the third way we measure GDP is the income approach, which is basically everything that's earned in the economy. So for us in terms of households that's wages and salaries, for businesses it’s profit, for example. So we measure everything we produce, everything we spend and everything we earn, and in principle, they should all add up.

MF

And you're boiling it down then, a vast amount of data flowing into the ONS, boiling it all down to one single indicator.

DM

We do, and we do that by approaching thousands and thousands of businesses asking them about their performance. We speak to thousands of households about their behaviour. And we also use a lot of data already available withing government, so what we call administrative data - data that already exists. And we bring all those different data sources into the building, we look at it and we confront it, and we come up with ultimately, as you suggest, a single number on the growth of the economy. MF What's changed in the in the collection of dat...