Newspaper article The Evening Standard (London, England)

Cheer Up! We Brits Are Far Too Gloomy

Newspaper article The Evening Standard (London, England)

Cheer Up! We Brits Are Far Too Gloomy

Article excerpt

Byline: Anthony Hilton CITY COMMENT

IT is difficult to know what, if anything, is gained by publishing quarterly growth figures. A period of one quarter is 13 weeks, which yields only 65 working days for those of us on a five-day week. This particular quarter also had to cope with two days of holiday over Easter and the two bank holidays in May, so there were only scheduled to be 61 days worked.

That seems a very flimsy base on which to draw hard and fast conclusions about the economy. The figures themselves are dubious because they are based on incomplete information, and in the past they have almost always been revised upwards as more data comes in -- such as income tax and corporation tax receipts, which give a better-quality picture of the actual rate of economic activity.

Collecting and analysing these can take up to two years but it tends to be worth the wait. A historical analysis by London School of Economics found that low initial figures get revised up while high initial figures get scaled back. But it is the scale of the revision that is striking. Over the 31 quarters in which negative growth had originally been reported in the recessions between 1976 and 2008, the average upward revision when the full facts became available was 0.95%. That is the average for each quarter, and it is a huge shift in the context of the numbers we were talking about. For example, the growth figure published yesterday was said to be 0.2% up on a year ago.

It is obvious that such a figure should be treated with great caution not only because it is in time also likely to be revised upwards but also because, in the context of only 61 days worked, the additional holiday for the Royal Wedding does in arithmetical terms make a huge difference.

If you were to assume that all the work scheduled for that day was lost, you are looking at a near 2% drop in output. The real world does not work like that, of course, and much of what would have been done will have been picked up by working longer or harder on other days -- much, but not all. …

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