The Great Debate UK
By Kathleen Brooks. The opinions expressed are her own.
China is often berated for providing unreliable economic data. Behind every release there are some who believe officials in Beijing have been at work to manipulate the data for the government’s benefit. But is China alone in this and can we trust the data coming from other economies in the West?
The Office for National Statistics (ONS) has a fairly patchy record at providing accurate data on the UK economy. For example, the first reading of Q2 GDP for this year was -0.7%, this was then revised up to -0.4%. A 0.3% discrepancy in a $2.5 trillion economy is no small chunk of change. The ONS even revealed that the Q2 data was more difficult to calculate than usual due to the extra Jubilee bank holiday and that GDP could be overstating the weakness in the UK economy.
And it’s not just GDP; The UK labour market has left some of the top economic minds in the country bemused. Whereas the GDP data suggests the UK economy is in the first double dip recession for 30 years, the unemployment rate has fallen from 8.3% to 7.9% since the start of this year and the UK economy has been creating jobs at its fastest rate since 2010 (the peak of the recovery from the Great Recession). How can this be? The official data is telling us that the economy is contracting yet we are creating jobs.
Some people now believe the ONS could revise UK GDP over the coming years that could potentially erase the 2012 recession altogether. Whereas China is sometimes accused of overstating its economy, in typical British understated style we could be making things worse than they actually are. If the UK economy is not in as dire straits as the GDP data suggests then imagine all of the wasted investment opportunities in 2012. The ONS’s inaccuracy and inability to account for one extra bank holiday in a quarter could weigh on growth in the future, especially if foreign investment has been deterred by the headline economic statistics that negatively portray our economy as hobbled compared to other regions of the world.