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 | |
-
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
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%
-
Inflating Figures
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.
-
Deflating Figures
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 new reference 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 |
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
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 |