Britain’s economy grew by 0.1% in August, beating the 0.1% contraction mostly forecast by economists polled by Reuters. The result, published on Thursday 15 October, gives the UK another month of expansion. It also raises a familiar question: what does a positive growth number actually tell us about everyday life?
The Office for National Statistics estimates that output rose 0.7% over the three months to August compared with the previous three months. In August alone, production increased 0.8%, services were flat and construction declined 0.2%. Consumer-facing services fell 0.3% that month.
Those figures can coexist. A country’s total output brings together a huge range of activity, from factories and professional services to restaurants and building sites. Stronger production can lift the overall number while businesses serving customers directly have a weaker month. Treating one as a verdict on the other misses that unevenness.
The comparison period matters, too. The 0.1% monthly increase and the 0.7% three-month rise answer different questions. One measures August against July; the other compares two three-month periods. Neither should be presented as an annual growth rate, and the three-month measure gives a broader view than a single month.
GDP measures economic activity. It is useful because a larger economy can support more jobs, investment and public revenue. But, as the Bank of England explains, it does not show how income is distributed. It also leaves out valuable unpaid work, such as looking after a relative. A national total cannot describe every household’s experience.
There is another distinction: these headline figures describe total GDP, not GDP per person. Population changes affect the relationship between the two. Even output per person is different from the money a household has left after taxes, rent, mortgage payments and other bills.
So the practical test goes beyond the headline. Is growth sustained? Does it reach more sectors? Do pay and disposable incomes improve after inflation? Today’s release does not answer all those questions, and it would be misleading to turn it into a new claim about household finances.
Our reading: August’s expansion is a positive result, with a stronger three-month picture alongside it. Whether people feel better off requires evidence about their incomes and costs, as well as the size of the economy.
Lead photograph: Marylebone High Street, London, 11 February 2020 (archive). CVB / Wikimedia Commons, CC BY-SA 4.0.
