DEFLATION of software investment has been formalised by the Office of National Statistics (ONS) for the first time.
ONS has published an article setting out details of improvements to the deflation of investment in software in the UK National Accounts, which will be implemented in the 2015 Blue Book.

Following consultation, the changes to be introduced will include an additional price index to deflate the pre-packaged component of software investment. As no other appropriate price index is currently available, the US Producer Price Index for pre-packaged software will be used for this component, adjusted for purchasing power parity.

The pre-packaged software market is globalised, so this gives a good representation of the UK position. The same practice has been adopted by some other comparable countries, such as Canada and Australia.

Indicative estimates suggest that the changes to the deflation of investment in software will lead to an upwards revision of 2.6 percentage points in the growth of Gross Fixed Capital Formation (GFCF) between 1997 and 2013, and an upward revision of 4.8 percentage points in the overall growth of business investment over the same period.