Andrew Lilico is the Chief Economist of Policy Exchange.
Last Friday, the Office for National
Statistics’ press
release stated: “Services growth in December pushes up GDP estimate”.
This led to considerable excitement, both in political and financial market
terms. Market watchers expected the pound to strengthen. There was speculation
that Gordon Brown might call a General Election.
But the pound actually
tanked, to some initial confusion. This should not, however, have
been a surprise, since GDP was actually revised down, not up. The
ONS press release headline was simply wrong. The initial estimate
for GDP in the final three months of 2009 was £315,845m as you can see here
(cell G289). This was revised last Friday to £315,712m as you can see here (Table C2).
The ONS had managed to confuse the level of GDP with the growth rate of
GDP. What happened was that (as has happened regularly during this
recession) the GDP level in the previous quarter (Q3) was revised down quite a
lot (things were quite a bit worse than previously thought). So the change
(the increase) between the third and fourth quarters was re-estimated up to
0.3% from 0.1%. That is obviously a bad news story – the economy was
worse than we had thought. But the ONS headline managed to turn that bad
news story into a (wrong) good news story. Only the Telegraph
ran the true story.
Given how politically sensitive GDP data is, and how jittery financial
markets are at present, this is a terrible blunder for the ONS to have made.
