National Minimum Wage

National Minimum Wage
Inflation and Gross Domestic Product
14 ONS publishes monthly inflation indices which reflect changes over twelve months in the
cost of a ‘basket’ of goods and services on which people typically spend their money.
We use two main inflation measures: the Consumer Prices Index (CPI) and the Retail Prices
Index (RPI).
15 Each measure uses the same basic price data, but the CPI (which follows international
definitions) excludes Council Tax and a number of housing costs faced by homeowners that
are included in the RPI. Other differences include: the methodologies used to combine
individual prices at the first stage of aggregation; the sources used to derive the weighting
that each component contributes; and the population whose spending the ‘basket’ is
designed to represent.
16 GDP provides a measure of total economic activity. It is often referred to as one of the main
‘summary indicators’ of economic activity and is used to measure growth in the economy.
In 2011 ONS implemented significant methodological changes in the production of GDP
figures, which brought the UK into line with international standards. These changes included:
adopting the 2007 SIC; using a revised classification of products; changing the method of
calculating inflation; utilising new sources of financial services data; and revising the base and
reference year.
17 Following these changes the 2008-2009 recession has been shown to be shorter (five
quarters instead of six) but deeper (7.1 per cent cumulative loss of output instead of 6.4 per
cent) than previously thought. The industrial breakdowns of GDP using SIC 2007 are only
currently available from 1995 onwards, meaning that consistent comparisons by sector with
previous recessions are not yet able to be made.
182