Gordon Brown and Ed Balls, architects of the pre-2007 mantra of “no return to boom and bust“, have left Parliament, and the contenders for the Labour leadership are busily reinventing their economic policy, so it’s only appropriate that the latest statistics reinvent the economic history! The figures show that the boom and bust were both greater than previously thought. And not for the first time!
The growth figures out today are not the top story – the obsession has been with the minuscule, no doubt momentary bout of deflation as the inflation figures get a minus sign – and they are not over-sold by the ONS. But look for the catchily titled “Impact of ESA 1995 Changes on Current Price Gross National Income Estimates, 2002 to 2010” and the rewriting of history is there.
The abstract says: “This article covers the changes to Gross National Income (GNI) on the European System of Accounts 1995 (ESA 1995) basis that will be introduced when revised figures for the UK National Accounts, consistent with Blue Book 2015, are published in September 2015. …….. The ESA 1995 changes being presented today, over the period 2002 to 2010, have the combined impact of reducing the UK’s total GNI by approximately £11.9 billion which is 0.1% of total UK GNI over the whole period. Not obviously worth reading on, is it?
This abstract is odd for two reasons. First, is this a release of data or not? It “covers” data to be released in September, it says. But it is the data that’s coming in September, pending any revisions!
Second, by saying that the combined impact over the nine year period is just 0.1% of GNI, it misses the main point. Look at the table below (from annex A of the release):
The -0.1% is the figure in the bottom right corner. But look more closely at the bottom line. The three years, 2004-06 is cumulatively 1.8 percentage points higher. The three years 2007-09 were 2.6 points lower. That’s £25bn more of boom over three years and more that £50bn more bust. Or as the ONS puts it, including other years, just 0.1% difference over the whole period!
They might well be keen to hide the difference between the new and old numbers as it is not the first time that revisions have increased the scale of the up and down. The ONS kindly publishes a history of its GDP revisions.
GDP is not the same as GNI but the table shows how estimates can change. GDP in 2005 was first published showing growth of 1.8%, was revised as high as 3.2% and now sits at 2.8%. GDP in 2008 went from growth of 0.7% to negative 1.1% and now is shown at negative 0.3%. These are big changes. One almost wonders what the GDP figures are worth?
This FT article tells the story of GDP and refers to a book by Diane Coyle. It’s all worth reading – then you can pay much less attention to the ritual of data release. Oh, and the data are expected to be revised in June, August, September and probably in October’s Blue Book.