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Britain’s sweeping revision of its coronavirus-era data this week destroyed many of the recent narratives about its economy.
The ONS figures show that the UK is not producing fewer goods and services than it was before the outbreak, but surpassed that benchmark in late 2021.
Instead of becoming a global outlier due to a weak economic recovery from the pandemic, Britain sits in the middle of the G7, roughly on par with France and ahead of Germany, new figures show.
The revisions show the economy growing 0.6% from pre-pandemic levels by the end of 2021, rather than contracting 1.2%.
The good news came in an obscure publication titled “TheImpact of 2023 Blue Book Changes on GDP“, triggering political frenzy. British Chancellor of the Exchequer Jeremy Hunt declared: “The decline narrative about the UK and its long-term prospects – where post-pandemic growth is often seen as the main evidence – is simply false. “
But the headline change is just the tip of the iceberg in terms of a shift in the narrative of the UK economy triggered by the statistics agency.
The sea change in detailed data for many sectors of the economy will completely change the way analysts and policymakers think about productivity growth, inequality and social changes since the pandemic.
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For example, gross value added to the economy by agriculture increased by 11.7% from the date of the Brexit referendum in 2016 to the end of 2021, according to previous data. But new data showed a 7% contraction.
And that’s by no means the biggest change. Based on previous data, basic steel manufacturing grew by 56% between 2019 and the end of 2021. After this update, the drop was 66%.
Overall, the services sector’s contribution to growth was revised upwards, while manufacturing, construction, agriculture and oil and gas extraction declined.
Many economists were somewhat shocked by the change in these numbers. Ruth Gregory, deputy chief UK economist at Capital Economics, said the ONS figures were “significantly different from previous figures”.
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Simon French, chief economist at investment bank Panmure Gordon, said that previous data showing the UK was at the bottom had damaged its reputation overseas, and the change “casts huge doubts among investors on recent conclusions”.
Some economists have defended the ONS changes, saying the pandemic is a time of great economic upheaval. Julian Jessop, a researcher at the Institute for Free Market Economic Affairs, said that “it is extremely difficult to measure GDP during the new crown epidemic”.
ONS have Several reasons were proposed for the drastic revision.
In 2020, it now believes that companies are producing goods and services, adding to large unsold inventories, rather than reducing them.
A larger revision, due in 2021, looking at each sector’s inputs and outputs in more detail, rather than simply focusing on turnover, guided the release of the original statistics.
That’s why some industrial sectors, such as steel, fare so poorly in the new data. For example, the ONS found that most of the added value generated by producing iron came from the energy used in the industry, while much less was generated by converting it into metal.
In contrast, the wholesale and retail industry has streamlined its cost base during the COVID-19 pandemic and thus generated more value than previously estimated.
Last year’s ONS figures were revised almost as large, but in the opposite direction. If you wait until now, the total change in two years will be much smaller.
Many other statistical agencies have yet to do an in-depth analysis of their COVID-19 GDP figures, and economists expect they too could make sharp revisions.
i date too show upward correction According to preliminary estimates in the era of the new crown virus.
Eurostat initially estimated that the EU’s economy contracted by 4.8% in the fourth quarter of 2020, but this has since been revised to a 3.8% decline. The initial rebound forecast of 4.8% over the next four quarters has been revised to 5.2%.
In the U.S, Latest Revision Analysis Showed very little deviation in the initial release. But overall, unlike European countries, China tends to revise down its GDP growth rate.
Rupert Harrison, George Osborne’s chief of staff when he was chancellor, said UK statistics tended to look dire when first published compared with the US.
“The post-2010 recovery was repeatedly revised upwards, while the US was revised downwards – we now know that both had the same growth from 2010 to 2016, but that was not the case then,” he said.
This is a long-term trend across the Atlantic. Before the financial crisis, Goldman Sachs calculated that annualized average quarterly growth figures were revised up by 0.7 percentage points for the UK, 0.5 percentage points for the euro zone and 0.3 percentage points for the US.
While the size of Britain’s economic adjustment was generally upbeat on Friday, economists warned that the big picture of the economy’s efforts to grow and improve living standards has not changed.
Gregory said: “As the UK may still face labor supply shortages, this does not guarantee future long-term resilience.”
George Buckley, chief UK economist at Nomura, said better performance in the past could lead to less room for a future recovery. “This could make the UK recession more risky because there is less chance of catching up (now),” he said.
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