Government rewrites UK economic history
The Office for National Statistics (ONS) said the UK economy has been performing significantly better - particularly in the last decade - than had been thought. Economic growth was stronger, the trade deficit smaller and investment record better than the old official figures indicated.
The net effect of the revisions - which affected records as far back as 1948 - was to raise the level of UK economic growth by an average of 0.2 per cent a year. The most marked improvement came in the last decade, where there were substantial data changes.
The new figures show that the 1991/92 recession finished six months earlier than first thought. Economic growth measured by gross domestic product (GDP) switched from negative to positive in the third quarter of 1992 rather than the first quarter of 1993. As a result, the British economy expanded by 0.1 per cent in 1992. Economists thought the economy had shrunk by 0.5 per cent over the year.
The 1991/92 recession was shallower than first thought, and the subsequent recovery stronger. Using the old method, the sharpest fall in UK growth was in the second quarter of 1991, when the economy contracted by 2.9 per cent. Using the new method, however, the economy contracted by only 2.5 per cent. According to the original ONS numbers, the economy grew by 2.7 per cent in 1995 and 2.2 per cent in 1996. But in yesterday's release, the growth figures were 2.8 per cent and 2.6 per cent respectively. The cumulative effect of the changes meant that 1997 GDP, calculated at current market prices, was more than pounds 15bn higher than previously thought.
Recent data on the UK's balance of payments was sharply revised. The current account deficit in the first quarter of the year, for example, was revised down sharply from pounds 3.2bn to pounds 0.5bn. In the second quarter of the year, the current account recorded a surplus of pounds 600m, to the surprise of City analysts.
Dharshini David at HSBC Securities said: "This does suggest that the the Asian crisis and the strong pound did not have quite as much of a detrimental impact as previously thought."
The ONS said there were a variety of reasons for the changes, including the legal requirement to make UK national accounts more like those of our European partners. The so-called European System of Accounts (1995) is different to the current UK system in numerous ways. For example, under ESA, mineral exploration is classified as "investment" not "expenditure", as is computer software. Other changes were designed to improve the reliability of official data, for example by helping eliminate data gaps and double- counting.
Although the new accounts make interesting reading for economic historians, the figures are unlikely to have substantial implications for today's policymakers, according to City economists.
Second-quarter GDP growth was little altered by the revisions. Quarter- on-quarter growth was left unchanged at 0.5 per cent, while the year-on- year rate was revised up 0.4 per cent to 2.6 per year. Manufacturing growth over the quarter was revised up from 0.1 per cent to 0.3 per cent.
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