Hamish McRae: Better times are around corner but quality of stats must rise

 

Outlook Yet another implausible set of GDP figures underlines the point that the country needs as a high priority to examine what has been going wrong at the Office for National Statistics.

Click HERE to view graphic

To have headlines declaring that the economy had shrunk by 0.7 per cent in the three months to end-June was, in the yah-boo of politics, embarrassing for the coalition. But this should not be a party-political issue. The previous government suffered equally when the ONS got the timing of the exit from recession wrong, initially saying we were still in recession when actually we had, like most other countries, returned to growth. If it is childish for politicians to use dodgy data for political ends, it is intolerable for the country as a whole to have statistics of this quality.

By coincidence, within a few minutes of the GDP release yesterday the CBI produced its quarterly industrial trends survey. This is what the CBI said in its introduction to this: "The UK manufacturing sector is showing resilience in the face of challenging economic conditions, with orders and output growth steady…Both measures of activity indicated modest growth in the three months to July, while manufacturers' optimism about the general business situation was broadly stable relative to the previous three months."

This comes on top of extremely encouraging employment figures, which showed in the three months to end-April, the private sector added a net 205,000 jobs, the second-highest rate of job creation ever. This is not, as you can see from the left-hand graph, consistent with a shrinking economy. We are getting close to the peak in employment at the top of the last cycle, though officially the economy is some 4.5 per cent smaller. As Chris Wilkinson of Markit points out, if the official figures of GDP were correct the UK economy would be shrinking faster than Spain's. Not even the most unutterably dismal economist could think that is the case.

It is perfectly possible that there might have been one quarter of negative growth over the past year and this may be it. But pull all the other data together and the figures would be consistent with an economy growing at around 1 per cent a year. That would be disappointingly slow. But I suppose it is understandable given what is happening across the Channel and given the debts households have to pay off. The latest banking figures confirm people are still doing that.

So what happens next? Everyone seems to expect a bounce in GDP in the third quarter but I would be suspicious of that too. What matters most, more important even than what happens to the eurozone economy, is what happens to inflation. Private-sector home demand accounts for half total demand, whereas exports to the eurozone are only about 8 per cent of demand. So while declining exports to the eurozone are worrying and inevitable, if the 50 per cent of demand from the home market is sustained, growth will be sustained.

That requires real incomes to start rising, which means inflation to fall below money wage growth. This has not happened on an annual basis but as an observant reader has pointed out, this is starting to come through if you do the sums on a three-month or six-month basis. Come the autumn the worst of the squeeze on living standards should be behind us.

News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits