Does GDP tell the whole economic story?

Answering a simple “How are you?” with an honest detailed answer may lead to an awkward silence.



After all, it’s often just longhand for “hello”. But the government’s official number-crunchers at the Office for National Statistics genuinely care about the response.



Next week, they’ll publish their statistics into how people across the country are feeling about their lives.

Have they gone soft? Not quite. They’ve realised that how we’ve traditionally measured living standards or economic well-being isn’t up to scratch.





We typically turn to GDP – gross domestic product. That’s the measure of how much companies, individuals and the government earn/spend/produce (in theory, each of those give the same answer), with an adjustment for exports less imports.

It measures the nation’s net income, but may not tell the whole story.

First, there are things which can skew the big picture. Take the first three months of this year, when the economy grew by 0.5%, according to the latest official figures.



At the time, many companies were busy stockpiling components and finished goods due to fears of a no-deal Brexit.

That makes growth look stronger, but that buzz of activity reflects contingency planning rather than a response to strong demand.

And it may mean less of that activity further down the line, making growth look weaker in subsequent quarters.