In April, the International Monetary Fund positioned itself to go head-to-head with the UK government over its fiscal stance. The fund said it wanted Britain to consider slowing deficit reduction and Olivier Blanchard, its chief economist, said the country was “playing with fire”.
A month later, the considered view of the IMF is much more nuanced. Here are the five things you need to know about the fund’s retreat.
If you read today’s Bank of England inflation report, you will notice some welcome changes. More will follow on this blog about the improvements in BoE transparency. In the meantime, the five things you need to know about the bank’s economic outlook are: Read more
The FT’s US economics editor Robin Harding had an excellent scoop this week on the US plans to change the calculation methodology for the national accounts in a move that will lift US GDP by 3 per cent in July. Even better, he explained that the changes to the way the US statistics authorities plan to count intangible investment and military procurement were not a unilateral act, but part of a United Nations coordinated approach. What effect would this have on Europe, I wondered.
Well, after a root around Eurostat’s website, the UK’s ONS methodology pages and some academic articles, I am really excited. The bottom line for people with better things to do is that Eurostat reckons GDP in most EU countries will also go up by about 2 to 3 per cent. The amount depends on the quantity of R&D expenditure carried out (good for Germany, Sweden and Finland, bad for Greece) and amount of military kit purchased every year (good for France and the UK). With some exceptions, every EU country has to put in place the new European System of Accounts by September 2014. But it gets even more interesting. Read more
After almost five years of disappointing services output, Britain’s shops, restaurants, car dealerships and airlines have come to the rescue of George Osborne. They have also saved the country from deeply misleading “triple-dip” headlines, although output is still 2.6 per cent below its 2008 peak.
The preliminary estimate of gross domestic product rose 0.3 per cent in the first quarter. As my column today argued, we should not pay much attention to this figure, since the cash estimates of GDP, which come later, are more relevant to the economy’s predicament. But there are some implications of this positive surprise and I list them here in order of importance. Read more
The Bank of Japan delivered a statement of intent on Thursday. Under its new governor, Haruhiko Kuroda, the central bank intends to eliminate the persistent deflation of the past 15 years within a two-year horizon. The FT news story provides the main details, save to say that in planning to double the monetary base (notes and coins, plus electronic money created by the BoJ) by the end of 2014, Mr Kuroda means business. Central bank communication does not often use words such as “massive”. Here are five answers to the big questions. Read more
In late February, the Office for National Statistics decided to classify the Treasury’s raid on the Bank of England’s accumulated interest payments from quantitative easing as a receipt for the public sector.
You can have a long and reasonable argument on whether the raid, euphemistically called a “cash management operation”, is a good idea. But I argued a few days later that the treatment of an internal public sector transfer of money as government revenue in the headline figures was a poor decision by the Office for National Statistics. There was no world in which the underlying public finances had been improved by the move, I argued.
As a journalist I was appalled that Britain’s independent statistical authority was setting out a legalistic argument for an economic question and for a set of statistics that were not governed by international conventions. I felt the statistics for borrowing and debt could not be trusted any more.
As a member of the public, I wrote to the chairman of the UK Statistical Authority, the statistics watchdog, to ask for a review of the ONS decision (email reproduced below). Today, I received a reply from Andrew Dilnot, the UKSA chairman (also reproduced). I am delighted to say the UKSA thinks I raised important points and has set up a short review. Read more
Having written rather outspoken columns about conceptual errors in the Retail Prices Index and criticising the UK statistical authorities for ducking the challenge of rectifying these errors, quite a few people have asked for some numeric examples about the scale of the problem so they can understand better how it arises.
(People who want the real gory detail should look at professor Erwin Diewert’s report)
The first thing to note is that contrary to well-intentioned explainers such as this one from the BBC, or the otherwise-rather-good editorial in today’s Times newspaper, the problem in the calculation of the RPI is not to do with the difference between geometric averages and arithmetic averages. It is really about the deficiencies of one particular arithmetic average, the Carli index.
Don’t just believe me, play with this spreadsheet, (Price indices). I will also help you to use it with a few worked examples. The worked examples are extremes, but they serve to show the important biases of different ways of calculating inflation. Read more
Last week, the International Monetary Fund published a working paper by Olivier Blanchard and Daniel Leigh revisiting the estimates of the effect of austerity that caused such a stir in the October World Economic Outlook. Many people took the box in the WEO as proof of the absurdity in attempts at deficit reduction.
At the time, I published an article and a technical blog in the FT, casting some doubt on the robustness of the IMF’s work. It also caused a minor stir. I included all the data so people could play around with the numbers themselves if they wished.
In December, another part of the IMF published a working paper using different methodology, which found much smaller multipliers. It is not the first time that different parts of the fund disagree. It will not be the last.
What does the new working paper say and what conclusions should we draw?
When the Office for National Statistics relaunched its website last year, a geek like me was distraught as it had failed to make navigation of the UK’s generally wonderful statistics easier. “The new ONS website – aaaargh,” I commented.
Today, I gave evidence on the communication of statistics to the Public Administration Select Committee and to test whether the website had improved materially I thought I would pick a relevant question, to which I wanted to find an answer as a member of the public and as an expert user of the website. The question was: Is unemployment higher or lower now than in 1995?
This is the website journey (for lay and expert users) I described in the Committee, which I think is accurate and depressing. I don’t think a non-expert could find the interesting answer (at the bottom of the post) and an expert has to take a long journey to get there. The result should be immediate on clicking on an unemployment link on the homepage or on typing in the relevant 4-digit code for experts. Again, the ONS website – aaaargh.
Member of the public Read more