There are three ways of measuring GDP, each of which theoretically should give the same answer, i.e.
1) the output method (all value added by each producer),
2) the income method (all income generated) and
3) the expenditure method (all spending on final demand).
In Ireland, the income and expenditure approaches are used. An output estimate is available on an experimental basis on the CSO website. Under the income approach, we measure the different elements of income such as
• profits of companies and of the self-employed
• remuneration of employees (wages, salaries and employers’ contributions to social insurance and pension funds including imputed contributions in respect of public service employees)
• rent of dwellings (imputed in the case of owner-occupied).
Adjustments are then made for stock appreciation (i.e. to eliminate the effect of price changes on stock holdings) and for interest paid by households (e.g. to banks).
In the expenditure approach we measure the different ways in which this income is spent on goods and services. We estimate
• personal expenditure on consumers’ goods and services
• expenditure by central and local government on current goods and services
• gross domestic fixed capital formation
• value of physical changes in stocks.
We then add exports, since exports contribute to Ireland's GDP because it is spending by other countries on Irish produced goods and services. Next, we subtract imports from our calculation because this total is spending by Irish persons on the outputs of other countries.
The two approaches (income and expenditure) should theoretically give the same answer. However, they will always diverge to some extent as they are derived from different data sources. This is the experience in all countries. Countries resolve the problem in various ways. In Ireland, the official level of GDP is taken to be the average of the income and expenditure estimates. A balancing item (statistical discrepancy) is also displayed which is half of the difference between the two estimates. This is the amount by which both estimates have to be adjusted to agree with the official level of GDP.
GDP and GNP are also calculated at constant prices chain linked. This removes any changes in prices which have occurred between years and allows us look at the volume changes (or growth rate) of the economy.
In making these estimates, CSO uses a wide variety of sources. Almost all of the different inquiries conducted by CSO are used in one way or another as well, of course, as providing information about their own subject matter. For example, employment totals from the Quarterly National Household Survey (QNHS) help in calculating total wages and salaries, the Household Budget Survey is used in estimating personal spending and so on.