Economy tracker: GDP

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BBC's Declan Curry explains just what GDP stands for and why we should care

The UK economy grew by 0.8% in the second quarter of 2014, maintaining its rate of growth in the first quarter of the year, according to the latest estimates from the Office for National Statistics (ONS).

It marks the sixth consecutive quarter of GDP growth and puts the economy past its pre-slump peak.

Understanding GDP:
  • Gross domestic product is a measure of a country's economic activity, including all the services and goods produced in a year
  • It is based on a huge survey of businesses and government departments compiled by the Office for National Statistics
  • An economy is generally considered to be in recession if it has contracted for two consecutive quarters
  • The first figures for any quarter are known as the "flash estimate" as they are based on incomplete data. The figures are revised at least twice as more information is collected

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After 1992, the UK economy and average household incomes enjoyed a period of unbroken growth.

But in 2008, the global financial crisis plunged the UK into its longest and deepest recession since comparable records began in the 1950s.

More than a million people lost their jobs as businesses - from shops to manufacturers and banks - either closed or laid off staff.

Consumer spending had been rising in the years leading up to the crisis thanks to a buoyant housing market and cheap and easy credit.

But the credit crunch and job fears meant consumers cut spending, deciding to pay off debt and save instead.

A fall in demand at home, and from abroad, hit businesses. They also found that borrowing from banks - which most rely on - was harder or more expensive.

The period since the start of the financial crisis has been categorised by short bursts of growth and contraction in what the Bank of England has described as a "zigzag" path to recovery.

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