What is GDP, how is it calculated, and is it essential?

A nation's GDP is a gauge of all the economic activity that its citizens, governments, and businesses engage in.

The Office of National Statistics (ONS) in the UK releases updated GDP statistics each month. Nonetheless, three months' worth of data is included in quarterly numbers, which are seen as more significant.

The majority of corporations, lawmakers, and economists like to see a steady increase in GDP.

This is due to the fact that it often indicates more consumer spending, the creation of new employment, increased tax revenue, and wage increases for employees.

A declining GDP indicates a contracting economy, which can be detrimental to both employers and employees.

What is the GDP of the UK right now?

The ONS claims that because of the rainy weather in April, there was no economic growth at all. This was less than the 0.4% from March.

With respect to the first three months of 2024, the most recent quarterly statistic was 0.7%, mostly due to high expenditure on services like retail, hotel, and public transportation. The original estimate of 0.6% was increased to the current amount.

The UK's GDP contracted in the last two quarters of 2023, but thanks to this growth, the country has emerged from the recession.

What impact does GDP have on you?

People pay more taxes as the GDP grows gradually because they are earning and spending more money.

This results in increased funding for the government, which it may decide to allocate to public services like hospitals, police stations, and schools.

These can reverse when a nation has a recession and its economy contracts.

Tax revenue is often lower for governments, thus they may choose to reduce or freeze public spending. Alternatively, taxes may go up.

The UK saw its worst recession in almost 300 years in 2020 as a result of the COVID-19 epidemic, forcing the government to borrow hundreds of billions of pounds to prop up the economy.

How is the GDP calculated?

GDP is measured using the following: output, expenditure, and income. These are explained below:

Output - The overall amount of products and services generated by all economic sectors, including government, manufacturing, agriculture, energy, and construction

Expenditure - The total value of goods and services that the government and individuals purchase, as well as the amount invested in constructions and machine. This also includes the amount calculated by subtracting imports from exports.

Income - The amount of money made, primarily in terms of earnings and profits

The ONS in the UK releases a single GDP statistic that is derived from the three metrics.

However, early estimates mostly utilise the output metric, which is based on information gathered from thousands of businesses.

(Sources: bbc.co.uk)