Glossary

activity rate
The sum of the employed people of working age and the unemployed people of working age, divided by the total population of working age. Also known as: participation rate.
balance of payments (BOP)
Summarises transactions between residents and non-residents during a period; consists of the current account, the capital account, and the financial account.
balance sheets
These record the value of financial assets and liabilities held at the start and end of a reference period. Start- and end-period stock levels are linked by a flow-stock relationship involving transactions, revaluation effects (for example, fluctuations in exchange rates or equity markets) and other flows (such as debt write-offs).
capital account
Consists of two components: capital transfers and the acquisition (purchase) or disposal (sale) of non-produced, non-financial assets.
capital accounts
The capital account records acquisitions less disposals of non-financial assets by resident units and measures the change in net worth due to saving (final balancing item in the current accounts) and capital transfers.
capital consumption
Consumption of fixed capital is the decline, during the course of the accounting period, in the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration, normal obsolescence or normal accidental damage.
capital input
Capital input includes anything that provides a means of producing output without being completely used up in the production process.
capital services
These are flows of productive services from capital assets, rather than the capital stock of those assets. They are directly comparable to flows of labour services measured by QALI.
capital share
The capital share of income estimates the income received by capital in the generation of value added, which includes gross operating surplus.
A type of VAT fraud detected in many EU Member States; it relies on VAT-free movement of goods between Member States.
classical measurement error
This error occurs where there is no bias but just some uncertainty over the true value. The true value is as likely to be higher than the sample estimate as it is to be lower than the sample estimate.
compensation of employees
Compensation of employees is defined as the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the latter during the accounting period.
construction output prices
The costs related to construction projects, covering materials, plant, labour and an allowance for companies’ margins and profits.
Consumer Prices Index (CPI)
The EU standardised index of consumer prices for the UK. The Bank of England’s target inflation measure.
consumption lags expenditure
We often buy goods but do not consume them immediately. I may buy a book but not consume (i.e. read) it until later. Likewise, I might consume durable goods, such as a laptop, for a number of years after I have purchased it.
consumption
The value of the set of goods and services that a household actually enjoys over a given period, for example, spending on food, recreational activities and clothes.
CPIH
A derivative of the Consumer Prices Index that includes owner-occupied housing costs.
current account deficit
The balance of payments records a country’s transactions with the rest of the world. The current account records international trade and cross-border income flows associated with the international ownership of financial assets, as well as current transfers (for example, foreign aid or remittances). If a country is running a current account deficit, it is said to be a net borrower from the rest of the world. Likewise, a country is a net lender to the rest of the world if it is running a current account surplus.
depreciation
The amount of capital resources used up in the process of production in any period. It is not an identifiable set of transactions but an imputed transaction, which can only be measured by a system of conventions.
discount rate
Discounting is a standard approach in economics to representing time preference where costs and benefits are incurred or accrued over different time periods. Assuming that there is a preference to receive benefits now rather than in the future, a discount rate reflects the scale of that preference and reduces the value of a future cost or benefit accordingly. A more detailed description of discounting, as often used in natural capital accounting, can be found in HMT Green Book.
discounted present value
The discounted present value represents the value today of the expected stream of costs or benefits arising from some asset or activity. Functionally, the expected return or loss in each year in the future for which one is expected, is multiplied by the discount rate for that distance into the future and added to all other years.
disposable income
Disposable income measures the amount of income people have to spend, literally ‘at their disposal’. It is, broadly speaking, their income after deducting direct tax payments (such as income tax) plus any cash benefits they may receive from the state.
double deflation
Double deflation is considered the best approach to producing volume estimates of gross value added (GVA). For every industry, the current price estimate of its output is deflated by a price index for output and the current price estimate of its inputs is deflated by an input price index. That is, outputs are deflated using deflators for the product produced, while the goods and services that are used as inputs to the production are deflated using relevant specific product deflators.
durable goods
Durable goods are ones that provide an ongoing source of benefits. They are not single-use items. A car, laptop or household furniture are good examples.
Earth observation data
The gathering of information about physical or biological features and systems on our planet. In recent years, advances in technology have meant that satellites have become a potent means of collecting such information, but Earth observation data also include what can be assembled by other means, such as road sensors, or even CCTV.
economic inactivity rate
The number of people of economically inactive people of working age divided by the population of working age.
economic inequality
This captures how unevenly distributed something is among a population. Economic inequality focuses on how key economic outcomes, such as income or wealth, are spread among the population.
economically active
The sum of those people who are employed or unemployed.
economically inactive
These are people who are not working and are not looking for work, or not able to take up work.
employed
Those people in work, either as employees or self-employed, who receive earnings in return for their work.
employment rate
The headline employment rate is calculated by dividing the employment level for those aged from 16 to 64 by the population for that age group.
equivalisation
Equivalisation is the process by which we adjust for the effect of household size and composition on living standards. This reflects the fact that households with more people require a higher level of income to achieve the same standard of living as a household with fewer people in it.
exhaustible natural capital
All natural capitals are ultimately exhaustible, since they can be exploited at a rate faster than the basic resource can naturally replenish. Non-renewable natural capitals are a special case, as the natural rate of replenishment is on a timescale (often thousands or tens of thousands of years) that makes very long-term sustainable use impossible.
export and import price indices
Exports are manufactured in the UK and destined for firms in foreign markets. Imports are manufactured overseas and purchased by UK firms. To compile the indices, the prices paid are measured directly.
factors of production
These are the inputs into the production process in order to produce output. These include the amount of labour and capital available. This covers tangible capital, such as machines and buildings, but also intangible capital such as the stock of human education.
financial account
Transactions that result in a change of ownership of financial assets and liabilities between UK residents and non-residents, for example, the acquisitions and disposals of foreign shares by UK residents.
financial assets and liabilities
Financial transactions capture the change of ownership in financial assets and liabilities. Examples include deposits, investments in equity, shares and bonds. A change of ownership leads to an income that is received on that asset and an income that is paid on the equivalent liability, such as interest or dividends. Financial assets are entities over which ownership rights are enforced by institutional units, individually or collectively, and from which economic benefits may be derived by their owners by holding them or using them over a period of time. There is a counterpart liability on the part of another institutional unit. The financial accounts show how net borrowing is funded or net lending is invested by recording changes in the net acquisition of financial assets and net incurrence of financial liabilities. Transactions are recorded for assets and liabilities on a gross basis, allowing for the full scale of financial activity to be captured.
fiscal consolidation
Fiscal consolidation refers to concrete policies aimed at reducing government deficits and debt accumulation, which are aimed at looking to restore sustainable finances. This is typically referred to as reducing the structural deficit of the government.
fiscal sustainability
Fiscal sustainability refers to the long-term projections for the public finances and sustainability of debt, which is typically considered a requirement for macroeconomic stability. An important feature is the debt dynamics, which capture the difference between non-interest spending and receipts as well as the difference between the effective interest rate paid on government debt and nominal GDP growth.
fixed assets
Property, plant and equipment. Fixed assets are not expected to be converted back into cash in the next year.
Flow of Funds Accounts
Financial accounts provide the flow and stock positions of financial assets and liabilities for households, corporations, government and the rest of the world. The Flow of Funds Accounts enhance the information provided on these financial positions by showing the bilateral debtor/creditor relationships of these transactions. These can be referred to as “from-whom-to-whom” accounts, as they provide a breakdown of the assets and liabilities by specific financial instruments that are owned, including counterparty information. That is, they provide information on who owns the financial asset and who owns the financial liability.
flow
A flow is an amount measured over a particular period, say a quarter or a year.
GDP deflator
The price of all the output that the economy produces. It is created using the components of real GDP, each deflated by the most relevant index of inflation.
Gini coefficient
A summary of statistics used to capture inequality. The higher the value of the Gini coefficient, the higher the inequality. The Gini coefficient is usually a value between 0 and 1.
global financial crisis
The global financial crisis (GFC) of 2007 and 2008 refers to a period of extreme stress in global financial markets and banking systems, in which the US subprime mortgage crisis was a catalyst for a financial crisis that spread from the United States to the rest of the world through linkages in the global financial system. The interconnectedness of global finance meant that the UK financial system was exposed to the fallout from the US subprime mortgage market. This led to some of the largest global financial institutions facing major financial difficulties and the failure of the financial intermediation system.
Great Moderation
The Great Moderation was a period of sustained macroeconomic stability that occurred across advanced economics. For the UK, this refers to the period 1993 to 2007, which was characterised by lower levels of output and inflation volatility, following the economic boom and bust cycles of the late 1980s and early 1990s.
gross disposable income (GDI)
This is the same as gross disposable household income. It is the amount of money that that all of the individuals in the household sector have available for spending or saving after income distribution measures (for example, taxes, social contributions and benefits) have taken effect.
gross domestic product (GDP)
GDP combines in a single number, and with no double counting, all the output (or production) carried out by all the firms, non-profit institutions, government bodies and households in the UK during a given period, regardless of the type of goods and services produced, provided that the production takes place within the country’s economic territory. It is calculated quarterly or annually, but it can also be calculated monthly.
gross fixed capital formation (GFCF)
GCF minus the change in inventories
gross national income (GNI)
The sum of a nation’s gross domestic product and the net income it receives from overseas. It was previously known as gross national product, or GNP.
gross saving
Gross saving is gross disposable income less final consumption expenditure.
gross value added (GVA)
Gross Value Added (GVA) is the value generated by any unit engaged in the production of goods and services. It measures the contribution to the economy of each individual producer, industry or sector. Simplistically it is the value of the amount of goods and services that have been produced, less the cost of all inputs and raw materials that are directly attributable to that production.
gross value added income GVA(I)
Gross value added income is GVA measured at current basic prices, which include the effect of inflation, excluding taxes (less subsidies) on products (for example, Value Added Tax). This involves adding up the income generated by UK resident individuals or corporations in the production of goods and services. It is calculated gross of deductions for consumption of fixed capital, which is the amount of fixed assets used up in the process of production in any period.
gross value added production GVA(P)
Gross value added production is GVA measured at both current prices and in chained volume measures (CVM). It is calculated for a given reference period as the total value of all goods and services produced (output), less goods and services used up or transformed in the production process, such as raw materials and other inputs (intermediate consumption). The production approach to compile GVA is conceptually equivalent to the income approach, but allows deflation of current prices to produce constant price measures, since the production components relate to goods and services that can be broken down into price and volume indices.
hedonic regression
Regression techniques are used to relate the price of a good to its characteristics. For example, the price of a computer could be related to its processing speed, the size of the hard drive and the amount of memory. Iterative regressions are run over a sample of goods in one month to relate the log of the price to different features, deriving a coefficient (or weight) for each feature. When a product is no longer available or a new product appears, the equation can be used to give a predicted price. The procedure is complicated and requires a good understanding of the products concerned.
high pay
Per the OECD: where someone earns more than 1.5 times the median hourly or weekly wage rate.
household costs indices
Measures of inflation designed to reflect costs experiences by households. They may include interest rates, mortgage repayments and insurance premiums; they account for payments when they are made. Each household has identical weight.
household final consumption expenditure
The total expenditure of households on consumption goods, including imputed rent for owner-occupied housing
household saving ratio
The saving ratio estimates the amount of money households and NPISH have available to save (known as gross saving) as a percentage of their total disposable income (known as total available resources).
imputed rents
Imputed rents are the costs that homeowners are viewed as incurring for living in their homes. It is based on the idea that, by living in your home, you are foregoing the rent you could charge; as such this is the opportunity cost of owning and living in a home.
income inequality
A measure of how unevenly income is distributed between a population of households.
income shares approach
An approach to measuring inequality that looks at what proportion of total income is owned by a particular part of the population.
income
The flow of additional economic resources accruing over a given period. For a typical household, this may include earnings and government benefits; for other households, this may include profits from self-employment, dividends or interest on savings.
indirect taxes
Indirect taxes are taxes that supposedly can be passed on, in whole or in part, to other institutional units by increasing the prices of the goods or services sold.
inflation rate
When people talk about the rate of inflation in a month, they are usually comparing prices with those of 12 months earlier. More precisely, it is the annual inflation rate, which is the increase in prices between the two dates as a percentage of the original figure. For example, if we are looking at monthly data and the index in January 2017 had a value of 106.5 and January 2018 had a rate of 109.2, then the inflation rate in January 2018 was 109.2 / 106.5 × 100 – 100 = 2.5%.
intermediate goods
Goods, created by other firms, consumed by firms in the production of their output. The value of intermediate goods is subtracted from GDP to avoid double counting.
International Investment Position (IIP)
A statement that shows at the end of the period the value and composition of UK external assets (foreign assets owned by UK residents) and identified UK external liabilities (UK assets owned by foreign residents).
investment
Spending on fixed assets, also known as gross capital formation (GCF)
invisible trade balance
The invisible trade balance is that part of the Balance of Payments that refers to international trade in services. This includes all intangible services which add to, or subtract from, the stock of material resources of a country by entering its economic territory (imports) or leaving it (exports), including services provided through foreign affiliates established abroad.
labour productivity
The total output produced relative to the amount of labour used to produce it, capturing the efficiency of the workforce. It reflects output per unit of labour input. There are several possible measures of labour, including the number of employees, the number of jobs or the number of hours worked.
labour share
The labour share of income estimates the income received by labour in the generation of value added, which includes compensation of employees.
Laspeyres index
The sum of each product’s price relative, multiplied by its weight.
lexicographic preferences
Comparative preferences where an economic agent prefers any amount of one good to any amount of another. In other words, there is no trade-off between them.
local authority
Local government structure varies across the UK. In England, some areas have two-tier authorities with service provision shared between country councils and district, borough or city councils. Other areas of England (particularly metropolitan areas) have a unitary tier. In Scotland, Wales and Northern Ireland, local government is based on unitary tier authorities.
Local Enterprise Partnership (LEP)
LEPs are voluntary partnerships between local authorities and businesses in England set up in 2011 by the Department for Business, Innovation and Skills to help determine local economic priorities and lead economic growth and job creation within the local area. Enterprise partnerships have also been set up elsewhere in the UK.
Lorenz curve
A curve showing the cumulative proportion of, for example, income that is earned by the households with the lowest incomes. This is plotted by arranging households in order from lowest to highest income; for any share of the population we can read off what share of overall income they earn.
low pay
Per the OECD: where someone earnings below two-thirds of the median hourly or weekly wage rate.
micro data
The term used to describe the record-level data from which statistics are compiled. For income data, this means the data about each household— such as their income and composition— that are used to calculate statistics such the Gini coefficient.
mixed income
Mixed income is the surplus or deficit accruing from production by unincorporated enterprises owned by households; it implicitly contains an element of remuneration for work done by the owner, or other members of the household, that cannot be separately identified from the return to the owner as entrepreneur, but it excludes the operating surplus coming from owner-occupied dwellings.
modifiableareal unit problem (MAUP)
The modifiable areal unit problem (MAUP) is a source of statistical bias that can have a significant impact on the results of statistical hypothesis tests into geographic areas. The resulting summary values (e.g. totals, rates, proportions, densities) are influenced by both the shape and scale of the aggregation unit.
multi-factor productivity (MFP)
Multi-factor productivity reflects the overall efficiency with which labour and capital inputs are used together in the production process. It is recorded in a growth accounting framework, in which the growth in MFP is measured as a residual – that is, the part of GDP growth that cannot be explained by changes in labour and capital inputs. It is also called total factor productivity or TFP.
natural capital
The stock of renewable and non-renewable resources—such as plants, animals, air, water, soils and minerals—that combine to yield a flow of benefits to people.
net domestic product (NDP)
GDP minus depreciation of a country’s capital goods
net financial assets
This is a stock concept; it is the total assets – total liabilities. This is also the same as net worth.
net international investment position (NIIP)
The NIIP measures the difference between the UK’s external stock of assets (that is, UK-owned claims on non-residents) and liabilities (that is, foreign-owned claims on UK residents). It is an important barometer of the financial creditworthiness of a country: too high a net liability position may imply unsustainable national borrowing, while a small net liability or asset position helps a country accommodate net financial inflows from increasing external liabilities to the rest of the world and/or from disinvesting previously owned external assets.
net lending/borrowing
Net lending is the net amount a unit or a sector has available to finance, directly or indirectly, other units or other sectors. Net lending can be derived as savings plus net receipts of capital transfers minus net purchases of non-financial assets (i.e. the balance of the capital account), or it can be measured as the difference between net acquisition of financial assets and net incurrence of liabilities (i.e. the balance of the financial account). The income and expenditure of the different sectors of the economy imply a path for each sector’s net lending to, or borrowing from, the others.
net national income (NNI)
Gross national income minus depreciations
net saving
Net saving is net disposable income less final consumption expenditure.
net worth
Net worth is the value of all the non-financial and financial assets owned by an institutional unit or sector, less the value of all its outstanding liabilities. It is a measure of the wealth of a unit or sector at a point in time.
Nomenclature of Territorial Units for Statistics (NUTS)
A geographical system, according to which the territory of the European Union is divided into hierarchical levels. The three hierarchical levels are known as NUTS 1, NUTS 2 and NUTS 3.
nominal GDP
A measure of the market value of the output of the economy in a given period. Also known as GDP in current prices.
non-financial assets
Non-financial assets held by households include produced and non-produced non-financial assets. Produced non-financial assets are those that have come into existence as outputs from the production processes, whereas non-produced assets are those that come into existence other than through processes of production. These non-financial assets include dwellings, other buildings and structures and land improvements; machinery and equipment; intellectual property products and land.
non-market goods
Non-market goods and services are those that are not provided through the market. These include some goods provided free of charge or subsidised by Government and own-produced services, such as looking after children.
non-market transaction
A transaction covering goods or services that a producer supplies to others free of charge, or at prices that are not economically significant.
non-profit institutions serving households
Non-profit institutions serving households, abbreviated as NPISH, make up an institutional sector in the context of national accounts consisting of non-profit institutions which are not mainly financed and controlled by government and which provide goods or services to households for free or at prices that are not economically significant. Examples include churches and religious societies, sports and other clubs, trade unions and political parties.
operating surplus
The operating surplus measures the surplus or deficit accruing from production before taking account of any interest, rent or similar charges payable on financial or tangible non-produced assets borrowed or rented by the enterprise, or any interest, rent or similar receipts receivable on financial or tangible non-produced assets owned by the enterprise.
primary income
Comprising compensation of employees, investment income, earnings from rent and taxes, and subsidies on production and on the import of goods.
primary incomes
Primary incomes are incomes that accrue to institutional units as a consequence of their involvement in processes of production or ownership of assets that may be needed for purposes of production.
producer prices
The prices at which firms buy and sell to other firms; also known as factory gate prices. The prices are divided into two indices: the price of inputs used in production processes, and the price of outputs produced.
productivity
Productivity is the relationship between inputs and outputs in the economy – it captures how efficiently production inputs are being used to produce a given level of output, capturing how much output is generated per unit of input. The most recognised measure is labour productivity, which captures the amount of output per worker or per hour worked. Productivity plays a key part in determining a country’s long-term economic growth.
public sector net debt (PSND)
Public sector net debt excluding public sector banks (PSND ex) represents the amount of money the public sector owes to private sector organisations including overseas institutions, largely as a result of issuing gilts and Treasury Bills, minus the amount of cash and other short-term assets it holds.
purchasing power parity (PPP)
A statistical correction that allows us to compare the amount of goods people can buy in different countries that have different currencies.
quality-adjusted labour input (QALI)
An input into estimating multi-factor productivity (MFP). QALI accounts for changes in the composition (or “quality”) of the employed workforce as well as changes in hours worked. It weights hours worked by different types of workers by their relative income share, reflecting their contribution to economic production.
ratio approach
An approach to measuring inequality that is calculated as the ratio of incomes measured at two points on the income distribution. We might compare the income 90th percentile—which is the income level at which 90% of people have a lower income—and the 10th percentile, which is the income level at which 10% of people have low incomes.
real GDP
Nominal GDP, adjusted for the effects of changes in prices. Also known as GDP in volume terms.
recession
In the United Kingdom, a recession is defined as a negative economic growth for two consecutive quarters. Other countries define the concept differently.
renewable natural capital
A renewable natural capital asset is one that can recover from human exploitation in a time period commensurate with long-term economic use, to enable maintenance of productive capacity at a steady rate.
representativeness
Representativeness describes the quality that the sample of data used in constructing statistics is representative of the population as a whole. One simple example is that the gender mix of the sample must be the same or very similar to the population as a whole.
Retail Prices Index
An index originally introduced to expedite wage bargaining, intended to be typical of the mass of the population and, therefore, excluding high-income households and certain pensioners.
revealed preference
Assessing willingness to pay from people’s observed behaviour, for example how much time and cost people seem to be prepared to incur to gain benefit from a non-market asset or service.
sample weighting
When producing statistics, the achieved sample does not always match the population we are trying to estimate. We can deal with this by putting more weight on the cases that are underrepresented. For example, if the number of men in an achieved sample is lower than the population as a whole, we increase the weight on the men who are sampled to given a more representative picture overall.
secondary income flows
The secondary distribution of income account of the national accounts shows how the balance of the primary income of an institutional sector and the total economy’s national income are allocated by redistributive transactions.
secondary income
The provision (or receipt) of an economic value by one party without directly receiving (or providing) a counterpart item of economic value.
secondary incomes
The secondary distribution of income account shows how the balance of the primary income of an institutional sector is transformed into its disposable income by the receipt and payment of current transfers excluding social transfers in kind. These redistributive transfers are mainly aimed at correcting social inequalities.
semi-durable goods
A semi-durable good is one that provides some element of ongoing benefit from its use but is not as long-lived as a durable good. For example, clothes may wear out more quickly than a piece of furniture, so are regarded as semi-durable.
services producer prices
The prices at which services, which make up 80% of the UK economy, are sold to other businesses. This is difficult to calculate, as services can be hard to define and tend to change frequently in non-obvious ways. The index is calculated quarterly.
SPI adjustment
The Survey of Personal Incomes (SPI) adjustment corrects for the under-recording of very high incomes in surveys of income. It takes information from income tax data to adjust survey income to provide a more accurate picture of those with the highest incomes.
stated preference
A systematic way of asking people for their willingness to pay for the benefit of some asset or service for which there is no market price.
stock
A quantity existing and measured at a particular point in time, say on New Year’s Day 2021.
trade in goods
A record of physical, produced items that add to, or subtract from, the stock of material resources of a country by entering its economic territory (imports) or leaving it (exports).
trade in services
A record of the value of services exchanged between residents and non-residents of an economy, including services provided through foreign affiliates established abroad.
trade in value added (TiVA)
The goods and services we buy are composed of inputs from various countries around the world. However, the flows of goods and services within these global production chains are not always reflected in conventional measures of international trade.
Törnqvist index
A Törnqvist index is a form of index where the weight is constructed using an average of the relevant variable in the current and base period. As such, it is a symmetric index as it gives equal weight to both periods.
unemployed
Those people who are not working, but are looking for a job and available to take up work should they find it.
unemployment rate
The headline unemployment rate is calculated by dividing the unemployment level for those aged 16 and over by the total number of economically active people aged 16 and over. Economically active is defined as those in employment plus those who are unemployed.
unweighted averages
  • Dutot: the mean of all prices for the month under consideration, divided by the mean of prices in the base month.
  • Carli: The mean of the price relatives (where a price relative is the ratio of each price in the month under consideration), divided by that price in the base month.
  • Jevons: The geometric mean of the prices in the month under consideration, divided by the geometric mean for the base month.
value added
The value of output minus the value of all inputs (called intermediate goods)
visible trade balance
The visible trade balance is that part of the Balance of Payments that refers to international trade in goods. This includes all tangible goods which add to, or subtract from, the stock of material resources of a country by entering its economic territory (imports) or leaving it (exports).
wealth
The stock of economic resources held at a point in time. It can be measured gross—ignoring any debts that need to be repaid—or net—after subtracting debts that will have to be repaid.
zero-hours contract
Workers are on call to work when their employers need them, but the employers do not have to give them work. Employees are also not obliged to work when asked.