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Annex A: How to use the GDP deflator series: Practical examples
The following is an extract from a deflator series and provides examples of how the series can be used.
GDP DEFLATORS AT MARKET PRICES, AND MONEY GDP
Please note: This table is for illustration only and its details are not updated with changes in the current deflator table
GDP Deflator Table
Money GDP Table
GDP deflator at market prices
Money GDP
Financial
2002-03
percentage change on previous year
Financial
Cash
Year
=100
Year
£ million
1990-91
70.984
7.90
1990-91
563,735
1991-92
75.285
6.06
1991-92
595,054
1992-93
77.756
3.28
1992-93
615,404
1993-94
79.874
2.72
1993-94
653,582
1994-95
81.053
1.48
1994-95
690,575
1995-96
83.414
2.91
1995-96
729,389
1996-97
86.292
3.45
1996-97
774,140
1997-98
88.48
2.54
1997-98
823,599
1998-99
91.031
2.88
1998-99
869,275
1999-00
93.046
2.21
1999-00
919,696
2000-01
94.251
1.29
2000-01
963,508
2001-02
96.721
2.62
2001-02
1,005,150
2002-03
100.000
3.39
2002-03
1,055,190
2003-04
102.789
2.79
2003-04
1,115,000
2004-05
105.161
2.31
2004-05
1,176,000
2005-06
107.812
2.52
2005-06
1,243,000
2006-07
110.702
2.68
2006-07
1,308,000
2007-08
113.691
2.70
2007-08
1,372,000
2008-09
116.761
2.70
2008-09
1,444,000
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Calculating Inflation Between Different years
A. In the above example there is a 2.21% increase in prices between 1998-99 and 1999-00.
i.e. ( 93.046 – 91.031 ) / 91.031 x 100 = 2.21
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Q. What was the cumulative inflation between 1997-98 and 2002-03?
A. 13.02% increase between 1997-98 and 2002-03.
i.e. (100 - 88.480 )/88.480 x 100 = 13.02%
Q. How much would £7.4 million in 1998-99 prices be worth in 2003-04 prices?
A. Using the GDP deflator series which shows that in 2003-04 prices are higher than in 1998-99 by a ratio of 1.13 (102.789 ÷ 91.031).
i.e. £7.4m x (102.789 / 91.031) = £8.36mTherefore £7.4m in 1998-99 prices is equivalent to £8.36m in 2003-04 prices.
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Q. How much would £85.32 million in 2002-03 prices have been worth in 1992-93?
A. Prices are lower in 1992-93 than 2002-03 by a factor of 0.778 (77.756 ÷ 100)
i.e. £85.32m x (77.756/100) = £66.34mTherefore £85.32m in 2002-03 prices is equivalent to £66.34m in 1992-93 prices.
-
Changing the reference year
It may be necessary to change the reference year you are working from.
The easiest way to achieve this is to divide all the deflators by the value of the deflator in the newreference year, then multiply by 100.
e.g. to rebase the series so that 1999-00 is the reference year (i.e. equal to 100)
1990-91
70.984/93.046 x 100
76.289
1991-92
75.285/93.046 x 100
80.912
1992-93
77.756/93.046 x 100
83.567
1993-94
79.874/93.046 x 100
85.844
1994-95
81.053/93.046 x 100
87.111
1995-96
83.414/93.046 x100
89.648
1996-97
86.292/93.046 x 100
92.741
1997-98
88.48/93.046 x 100
95.093
1998-99
91.031/93.046 x 100
97.834
1999-00
93.046/93.046 x 100
100.000
2000-01
94.251/93.046 x 100
101.295
2001-02
96.721/93.046 x 100
103.950
2002-03
100/93.046 x 100
107.474
2003-04
102.789/93.046 x 100
110.471
2004-05
105.161 /93.046 x 100
113.020
2005-06
107.812 /93.046 x 100
115.870
2006-07
110.702 /93.046 x 100
118.976
2007-08
113.691/93.046 x 100
122.188
2008-09
116.761/93.046 x 100
125.487
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Producing a real terms series
To produce a real terms series, divide each value in the series by the given deflator for that year, and then multiply by the deflator for the year that you wish to be the reference year.
e.g. Consider the following example, which shows expenditure on X for 1999-00 to 2002-03, and suppose we wish to create a real terms series, with 2000-01 as the reference year.
Year
GDP deflator
Expenditure on X (£m)
1998-99
91.031
204
1999-00
93.046
219
2000-01
94.251
240
2001-02
96.721
258
2002-03
100.000
272
For 1998-99, multiply £204m by 94.251 and divide 91.031 gives:
(£204m x 94.251)/91.031 = £211.21
Similarly for the other years gives:
Year
GDP deflator
Expenditure on X (£m)
Real terms expenditure (£m) in 2000-01 prices
1998-99
91.031
204
211.22
1999-00
93.046
219
221.84
2000-01
94.251
240
240.00
2001-02
96.721
258
251.41
2002-03
100.000
272
256.36
*Note that in this example as 2000-01 is the reference year for the real terms series, actual expenditure is equal to real terms expenditure
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How To Calculate a Real Terms Growth Rate
Following on from the example above you may wish to calculate a real terms growth rate. This will show year on year percentage growth rate in the real terms expenditure series. To get a real terms growth series simply calculate the year on year percentage growth rate of the real terms expenditure figures.
i.e. For 1999-00
(221.84 - 211.22)/211.22 x 100 = 5.03%
Similarly for the other years gives:
Year
GDP deflator
Expenditure on X (£m)
Real terms expenditure (£m)
Real terms Growth Rate (%)
1998-99
91.031
204
211.22
1999-00
93.046
219
221.84
5.03
2000-01
94.251
240
240.00
8.19
2001-02
96.721
258
251.41
4.75
2002-03
100.000
272
256.36
1.97
Last Updated June 30, 2004 by Paul Oroyemi
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Email: GDPDeflators@hm-treasury.gov.uk
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