By John Charles Dyer, UK Correspondent
18 May 2013. The theme du jour seems to be “nascent economic recovery.” That phrase popped up everywhere late April, accompanied by analyses of economic indicators allegedly supporting the theme. 15 May 2013 the Bank of England became the latest, projecting a “modest” but “sustained” recovery for the UK.
It would be very welcome if true. Everyone hopes for the best. No one hopes for the worst. No one enjoys debunking hope. No one wants to bring the economy down by "talking the economy down."
Nor do we want to fool ourselves.
Read the fine print
Commentators seem to rely at least partially on a recent ONS estimate of GDP. ONS estimated the economy grew 0.3% in the First Quarter of 2013 over the previous Quarter and 0.4% over the same Quarter in 2012. But there’s an asterisk for those estimates.
“... this estimate is [based on] around 44% of the total required [information] ... [ONS had] good information for the first two months ... [and an] estimate for the third month which takes account of early returns to the monthly business survey ... [ONS had] between 30-50% at this point ... [Therefore the] estimate .... [is] subject to revisions ... typically small (around 0.1 to 0.2 percentage points ... .”
A lowering by 0.2 would change growth to 0.1% over last Quarter of 2012 and 0.2% over the prior year. Nor is this asterisk the only caution. The final estimate will be based on what actually happened during the quarter. ONS has already published reports in May that cannot be fairly read to indicate growth.
You can’t rely on headlines.
Take for example a 10 May release from the Office of National Statistics concerning first quarter 2013 construction. According to the BBC the headline implication was, “Construction data suggests UK avoided a double-dip.” Unless one read the ONS report itself one would not know ONS characterized the data as showing construction during the first quarter was at its lowest level since 1998.
As it happened, the story did not receive a lot of coverage. Originally scheduled to come out Monday it came out instead on on “Take out the Trash” Friday.
The same day provided another example. ONS released reports on the trade balance between the UK and the Europe and also the UK and non European countries. BBC dwelt on the increase in trade with non European countries. As to trade with Europe, BBC characterized that as “flat,” again “suggesting” no double dip last year.
This is what ONS actually reported about trade with Europe:
“There is an increase of 31.8 per cent in the trade gap, the difference between UK imports from the EU and exports to the EU. This is the biggest increase in the trade gap in recent years. This difference is now £6.1 billion.”
Then there was manufacturing and production. BBC described this as “industrial output beat forecasts.” It did -- from February to March of this year -- but year-on-year -- according to ONS -- both figures were lower March 2013 than March 2012, which was lower than March 2011. As an ONS graph makes plain, while there were multiple ups and downs over the last 2 years, the slope of the curve has been down throughout.
The final example is employment. ONS released its report 15 May 2013. BBC focused on a 15,000 increase in the unemployment rate while noting a 43,000 decrease “in employment.” In an online piece BBC noted these statistics aren’t consistent with a picture of a recovering economy. But even this piece did not note the very first thing ONS wrote -- the rate of of working age adults actually in work fell.
I call attention to this statistic regularly. It's not the same as the number of unemployed. It's far more significant in that it puts employment in context. The population grows. The need for new jobs grows, a fact often glossed over in discussions of increases in the absolute number of people in work. As documented previously, the rate of working age adults actually in work declined steadily during 2008-2013.
BBC also noted total pay rises were at lowest levels since 2009. But BBC did not mention regular pay rises were at the lowest level since comparable records began (2001).
15 May 2013 BBC News at 1 led with the Bank of England forecast. BBC News at 6 did mention regular pay rises declined, but folded that information into the tail end of its coverage of the Bank of England’s forecast without highlighting rises were at the lowest level since 2001.
BBC's online piece did not offset the employment news with the Bank of England forecast. The piece painted a fairly bleak picture. But unless you went to the ONS site and looked up the actual ONS report, you would not know even from this piece how seriously ONS itself rated the employment developments it tracked.
Don’t bet your children’s future on hopeful pronouncements
The indicators raise serious red flags concerning both the final First Quarter GDP estimate and the Bank of England’s optimism. It’s understandable why one might prefer good news, why one might search for “green shoots” in all those brown stalks. But before you bet your children’s future on hopeful pronouncements, fact check the headlines for yourself. ONS publishes its own take on its own statistics, readily available on line. That take speaks volumes.