Tue. Dec 7th, 2021


The UK’s statistics agency will face a communications problem this week when it publishes two sets of official figures for the size of the economy that paint conflicting images of coronavirus recovery.

The problem will arise on Thursday when the Office for National Statistics publishes both its quarterly and monthly figures for the gross domestic product. The quarterly figures will show that the UK economy is still a short distance from its pre-pandemic size, while the monthly figures are likely to show that the economy is within a hair’s breadth of achieving that benchmark.

The discrepancy arises because the US uses different techniques to measure gross domestic product on a monthly basis compared to a quarterly basis and these estimates are currently far apart even though they are trying to measure the same thing.

Economists say the discrepancy will create difficult problems for the Statistical Agency, the Office of Budgetary Responsibility and the Bank of England.

Liz Martens, British economist at HSBC, said: “Where the economy stands relative to its pre-pandemic level is key – it is an accessible and understandable measure that tells us how far the economy has fallen, how far it has recovered and how it compares with other countries.

“The statistics essentially give us two very different sets of answers to those questions. It makes a difference for policymakers: it affects the OBR’s loan projections, and the BoE’s decision on whether or not to raise interest rates. ”

The ONS is aware of the problem and when contacted by the Financial Times, officials indicated that they would judge that the economy of Covid-19 has recovered when the monthly figures show that the British economy regained the lost output during the pandemic .

Line chart of GDP index: 2019 = 100 showing The US monthly GDP figures show a much stronger recovery than the quarterly figures

This moment could happen as soon as Thursday if the September data is strong, but is more likely in a month.

Both of these dates are far ahead of the BoE’s forecast that economic output will only recover lost output in the first quarter of next year because the central bank uses the US quarterly figures according to convention.

The quarterly data between April and June this year showed that GDP was 3.3 per cent lower than its level in the fourth quarter of 2019. The same comparison using the monthly data shows only a 2.3 per cent gap.

The latest data for monthly GDP show that it is only 0.8 percent lower in August this year than in February 2020, before the pandemic.

Economists expect another 0.4 percent monthly growth in September, leaving the most recent monthly data just 0.4 percent below the pre-pandemic level and on track to narrow the gap in October or November.

If economists are right, the monthly data will show that the average level of GDP in the third quarter is 0.9 percent below the fourth quarter of 2019, while the official quarterly data is likely to show a gap of 1.8 percent, according to the BoE with the gap only closed at the beginning of 2022.

The difference arises because the monthly figures are based on an attempt to summarize the output of each industry and this analysis gives stronger indications than other methods of calculating GDP, including the measurement of expenditure in the economy or income.



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