Lies May Overshadow U.K. GDP in Election Fight

Britain’s warring political parties will waste no time turning Tuesday’s economic numbers into a stick to beat the opposition. They won’t be so quick to remind voters that the eventual picture may tell another story.

In the last major piece of U.K. data before the May 7 election, the Office for National Statistics said growth slowed in the three months through March. The 0.3 percent expansion was the worst reading since 2012, and below economists’ forecasts.

The reading is based on less than half the information the statistics office will ultimately include, and revisions months and years later may change the figure by almost half a percentage point, a Bloomberg analysis going back more than a decade shows.

That won’t stop Prime Minister David Cameron and opposition rival Ed Miliband seizing on the figures to make the case for their parties, which are still running neck-and-neck in polls nine days before the vote.

“The number is going to be used and abused,” said Simon Kirby, an economist at the National Institute of Economic and Social Research. “It’s lies, damned lies and statistics, and the ONS have no control over how people interpret it once it’s out there in the public domain.”

Since Cameron’s Conservative-led government took office in 2010 the economy has grown almost 10 percent and its expansion last year was faster than any other in the Group of Seven.  Miliband, whose Labour Party would likely gain power with the support of the Scottish National Party if current polling is replicated on May 7, says the recovery has failed to improve living standards for most.

The data produced a range of interpretations by political parties.

“Good news,” Chancellor of the Exchequer George Osborne said on Twitter. “Economy continues to grow but this is a critical moment & reminder you can’t take recovery for granted.” “These disappointing figures show economic growth slowing down,” said Ed Balls, who speaks for the opposition Labour party on economic matters.

Liberal Democrat Danny Alexander, chief secretary to the Treasury, said “the underlying figures show that we are still making solid progress across the wider economy” though some Tory proposals are “a real threat to all the hard earned progress we’ve made to date.” His party is the junior partner in Cameron’s coalition.

The first estimate of U.K. GDP is published less than a month after the end of the quarter, which means Britain is usually the first among the G-7. In the absence of complete data, the ONS uses its own estimates.

Second and third estimates are published in the next two months, with an average absolute difference of 0.1 percentage point between the first and third. After three years, almost all of the information that feeds into the statistic has been included, said Joe Grice, chief economist at the ONS.

That widens the average difference to 0.3 percentage point, according to Bloomberg calculations. Add in any subsequent methodological changes and the average versus the first take is 0.4 percentage points.

In other words, the reading Tuesday — which was less than the median 0.5 percent forecast by economists — could turn out to be  a 0.1  percent contraction or 0.7 percent growth, which would make for a very different political story. Previous revisions revealed the recession of 2012 never happened, and the slump of 2008-2009 was shorter and shallower than first estimated.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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