Glossary

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
Spending on consumer goods.
CPIH
A derivative of the Consumer Prices Index that includes owner-occupied housing costs.
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.
fixed assets
Property, plant and equipment. Fixed assets are not expected to be converted back into cash in the next 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.
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.
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.
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
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.
investment
Spending on fixed assets, also known as gross capital formation (GCF)
Laspeyres index
The sum of each product’s price relative, multiplied by its weight.
net domestic product (NDP)
GDP minus depreciation of a country’s capital goods
net national income (NNI)
Gross national income minus depreciations
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-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.
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.
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. 
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.
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.
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.
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)