| Topic: | It may not be a double dip recession after all say leading economists | |
| Posted by: | David Giles | |
| Date/Time: | 26/04/12 17:38:00 |
| According to Philip Aldrick in the Daily Telegraph: " Economists have been questioning the reliability of Office for National Statistics' (ONS) numbers for a while now, but the latest data drew the debate sharply into focus. " At -0.2pc, the GDP reading was considerably worse than the consensus of 0.1pc growth. The "discrepancy", as Goldman Sachs' Kevin Daly described it, was "unbelievable" because much of the recent survey data – from the Bank of England's agents' reports to the purchasing managers' indices – have been encouraging. " " Andrew Goodwin of the Ernst & Young ITEM Club agreed. "Our reaction is one of disbelief," he said. "The divergence is virtually unprecedented and must raise significant question marks over the quality of the data." "They are not alone. No lesser institution than the Bank of England has queried the ONS data. Last week, minutes to the Monetary Policy Committee meeting damningly noted: "The sharp falls in construction output in December and January were perplexing, and the Committee was minded not to place much weight on them." "The Bank already assumes the ONS data is inaccurate, producing its own "backcast" of growth estimates on which to build its economic policy models. However, last week's comments went further than usual. Pointedly, they related to construction data, over which there has been a row since the method of calculation was changed in early 2010. "Perhaps not coincidentally, it was construction that plunged Britain into its first double-dip since 1975. The ONS claims the new construction figures are better than the old ones but still admitted there is "a tendency for upward revisions of between 1pc and 2pc". " ONS first estimates of growth are notoriously inaccurate, largely because only 40pc of the data are available, with a margin for error of 0.2 percentage points. But even later estimates undergo remarkable changes. "In 1991, then-Chancellor Norman Lamont was pilloried for suggesting he had spotted "green shoots". At the time, the country was thought to be in the midst of an agonising recession. Years later, that was revised away – showing Lord Lamont had been right. " Last year, the ONS published a raft of revisions that revealed the economy had not shrunk 6.4pc in the recession, but by 7.1pc, and that the downturn had lasted three months less than thought. The changes were dramatic. Rather than contracting 0.4pc in the third quarter of 2009, it grew 0.2pc. " Maybe it is too early to say. |