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The effects of annual chain-linking on the output measure of GDP
What is meant by annual chain-linking and what the likely effects will be on economic growth once it is introduced in September 2003.
The Office for National Statistics will be introducing annually chain-linked volume measures to the United Kingdom National Accounts with the Blue Book 2003 edition. This will improve the quality of growth estimates and is in line with developments in other countries in the European Union. A system has been developed for the output measure of Gross Domestic Product, implementing annual chain-linking at a detailed level in the Standard Industrial Classification (SIC).
For the purpose of this article, value added weights for years other than 1995 have been constructed using information from the industry breakdown available in UK Input-Output Supply and Use Tables and from other sources. The resulting growth estimates based on annual chain-linking are compared with the fixed base estimates (1995=100) published in Blue Book.
The comparisons suggest that annual chain-linking will cause estimates of the overall growth of GDP, measured by industry, to be revised slightly downwards. One issue for users will be the loss of additivity for all but the last two years of annual estimates.
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