Macroeconomics For Dummies®, uk edition Published by: John Wiley & Sons, Ltd

Revising the estimates

Calculating the GDP of an economy is no easy business. Much of the data used is collected via surveys. These surveys sample only a relatively small proportion of individuals/firms in an economy and then use the insights gained to extrapolate to the economy as a whole. Calculating the GDP for a

quarter that has just recently passed is especially hard – little data is available from which to make an estimate.

As time passes, more and more data becomes available, allowing for a more precise estimate of GDP:

The first estimate for quarterly GDP is made 25 days after the end of the quarter. At this early stage, no data is available to calculate GDP using the income or expenditure approach. The only estimate available uses the data on total output and even this data is largely incomplete.


The first estimate is then revised at the 55-day mark using income and expenditure data as well as new output data.


Another revision is conducted at 85 days, which provides an even more accurate estimate.


Revisions regularly take place months or even years afterward. You

can see these revisions in the Blue Book: the annual publication of national accounts in the UK (you can find it on the ONS website, www.ons.gov.uk). These revisions occur because of better data and improved methodology and changes in international accounting standards.

Accounting for quality improvements

One of the biggest problems when trying to compare real GDP across time is the fact that often the quality of products increases over time, especially in the technology industry. A laptop computer today is far superior to one from a decade ago. Furthermore, despite the higher performance, the real price of a laptop today is also much less than it was a decade ago. Simply comparing the total market value of laptops sold today compared to a decade ago would erroneously give you the impression that living standards (at least as far as laptops are concerned) have fallen. Whereas in fact the truth is that more people have access to high-performance laptops today than ever before!

Trying to take into account quality improvements isn’t easy, and

despite the best attempts of the good statisticians at the ONS, macroeconomists think that real GDP figures don’t sufficiently correct for quality improvements (like improved computing performance). This means that living standards may in fact be rising faster than increases in GDP would suggest.