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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.

## 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 deflatorat 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 2000-01 94.251/93.046 x 100 101.295 2001-02 96.721/93.046 x 100 103.95 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 100 113.02 2005-06 107.812 /93.046 x 100 115.87 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