Morning:
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It is intriguing that survey findings, like yesterday's offering from the British Chambers of Commerce, and anecdotal data such as last week's report from Marks & Spencer, suggest strongly that the country is already in recession.
This, however, is not the message from the official figures, which raises an interesting question. When the figures say one thing and you see something else, what do you believe? Or, as a reader mischievously put it in an email, if it requires a survey of businessmen to tell us what is happening in the economy, what is the function of economists?
There is, however, a deeper point here, which is that economic data does seem consistently to paint a rosier picture of the economy than one experiences from living in it.
In some ways it was ever thus. I sometimes thought I inhabited a parallel universe when Gordon Brown used to speak on Budget days. He would boast how he presided over an economy with the lowest unemployment for 30 years, the lowest interest rates for 50 years and the highest growth rates in the Western world - whereas I lived in an economy with a colossal balance of payments deficit, a growing army of unemployable school leavers, crumbling infrastructure and an unhealthy dependence on financial services.
But perhaps, more importantly, there is something wrong with the figures. It is quite easy to see how this might happen. The state accounts for some 40% of economic activity in this country, and presumably the statisticians have to take a view on the extent to which this spending delivers growth.
Does £100 spent in the National Health service delivers £100 of value, or £103, or possibly £97? If it is the higher number, that would boost economic growth. If they were allowed to put in a lower number, it would be a drag. If they inferred that NHs spending added value when in fact some of it was wasted, this would overstate the rate at which the economy was growing. Or if people paid more council tax but ended up with the same or poorer services - a not uncommon experience - it is possible that the increased income of the councils would translate in the statisticians' eyes into an increase in gross domestic product.
Even if we can believe the raw growth figures, there is potentially another problem arising out of the inflation number. The Retail Prices index and the Consumer Prices index are useful for measuring the trend in prices over time but they are less convincing in their measure of the actual level of inflation, which most people feel currently is perhaps 3% higher than the officially quoted rate. This, again, would impact the real rate of economic growth as economists would knock 3% too little off the nominal-GDP to calculate the real GDP as a result of underestimating inflation. This highlights, if nothing else, how difficult it is to measure what is really happening in the economy as it happens. But that should remind us to treat the figures with caution. Faced with official statistics or a survey from the real world of business, the survey is likely to be closer to what is actually happening.
