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Chris Giles How to raise growth 2014-style

April 25, 2013 6:13 pm by Chris Giles

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

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Chris Giles A positive surprise on UK growth

April 25, 2013 10:06 am by Chris Giles

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

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Robin Harding Reinhart-Rogoff Initial Response

April 16, 2013 9:08 pm by Robin Harding

Here below is the full statement from Carmen Reinhart & Kenneth Rogoff giving an initial response to criticisms of their work: Read more

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Chris Giles The ONS gets left behind

March 21, 2013 5:25 pm by Chris Giles

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

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Robin Harding Geithner →→→ CFR

February 6, 2013 3:16 pm by Robin Harding

The initial resting place for Timothy Geithner, who stepped down as Treasury secretary two weeks ago, will be at the Council on Foreign Relations in New York. Per their release today:

Timothy F. Geithner, the 75th Secretary of the U.S. Department of the Treasury, will join the Council on Foreign Relations (CFR) later this month as a distinguished fellow. Geithner, who was previously a senior fellow at CFR in 2001, will be based at the organization’s headquarters in New York. Read more

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From FT.com January 14, 2013

The Bank of England. Getty Images

The Bank of England has reaffirmed its plans to tackle housing bubbles by raising lenders’ capital requirements, rather than banning borrowers from taking out certain types of mortgages.

The BoE’s interim Financial Policy Committee, the body set up to safeguard the stability of the financial system, on Monday said it would aim to reduce “exuberance” in the housing market by raising so-called “sectoral capital requirements” that make lenders hold more capital against certain types of loans.

 Read more

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Chris Giles Measuring inflation (not that wonkish, really)

January 11, 2013 3:44 pm by Chris Giles

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

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From FT.com December 19, 2012

Almost a year ago to the day, the European Central Bank averted financial disaster in the eurozone by offering banks an unlimited injection of cheap three-year cash. Hundreds of banks participated in the ECB’s loan programme and by March about €1tn had been pumped into the banking system via two tranches of the ECB’s longer-term refinancing operations.

The LTRO sugar hit was deemed a success, avoiding a liquidity squeeze, temporarily lifting markets and encouraging a flurry of bond issuance in January and February. But as eurozone worries resurfaced, it was Mario Draghi’s pledge in July to do “whatever it takes” to save the euro followed by the ECB’s September offer to buy up the debt of ailing governments via so-called outright monetary transactions that changed the tone of markets.

 Read more

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From FT.com December 18, 2012

Ingram Pinn

To understand Ben Bernanke, it helps to set aside the ubiquitous pictures of today’s 59-year-old: the controlled beard, the pristine shirts, the worn-down weary look. Instead, search for a snap of the freshly minted graduate who gazes from the pages of the 1975 Harvard yearbook. Unlike the other young men pictured alongside him, Mr Bernanke sports no tie and no blazer. He has a loud checked shirt, long hair and a tremendous, rebellious handlebar moustache.

The moustache may be gone, but the US Federal Reserve chairman remains a rebel – and the world is better off for it. The Financial Times has already crowned its man of the year: Mario Draghi, the European Central Bank president. But my pick for silver medal is Mr Bernanke. The fact that he is sometimes pilloried only underlines his fortitude. Read more

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From FT.com December 17, 2012

Is the eurozone set to be the most dynamic economy? Getty Images

Where would you find the soon-to-be most dynamic economy in the western world?

The counterintuitive answer from Mario Draghi, European Central Bank president, is none other than the emotionally battered and low-on-festive-cheer currency bloc whose name has become synonymous with crisis, recession and gloom.

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