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This week’s sweeping revisions to Britain’s coronavirus-era data have destroyed much of the recent narrative about the UK economy.
Rather than the UK still producing fewer goods and services than before the pandemic, figures from the Office for National Statistics show that the UK’s gross domestic product exceeded that benchmark in the second half of 2021.
And instead of the UK being a global outlier, characterized by a weak economic recovery from the pandemic, new data shows the UK is in the middle of the G7, roughly on par with France and ahead of Germany. ing.
According to the revisions, by the end of 2021 the economy would have expanded by 0.6% compared to pre-pandemic levels, instead of contracting by 1.2%.
This good news isImpact of Blue Book 2023 changes on gross domestic product” sparked political excitement. Prime Minister Jeremy Hunt declared: “The decline narrative about the UK and its long-term prospects, with post-pandemic economic growth usually cited as the key evidence, is simply wrong.”
But this change in headlines is just the tip of the iceberg in terms of the changing story of the UK economy revealed by the Office for Statistics.
The radical changes in detailed numbers across many sectors of the economy will completely change the way analysts and policymakers think about productivity growth, inequality, and social changes since the pandemic.
For example, previous data shows that the gross value added to the economy by agriculture increased by 11.7 percent from the day of the Brexit referendum in 2016 to the end of 2021. But new data shows a 7 percent contraction.
And this is by no means the biggest change. Basic steel manufacturing increased by 56% from 2019 to the end of 2021, according to previous figures. With this update, that turned into a 66% decrease.
In general, the contribution of services to economic growth has been revised upward, while manufacturing, construction, agriculture, and oil and gas extraction have declined.
Many economists expressed some alarm at this change in numbers. Ruth Gregory, deputy chief UK economist at Capital Economics, said the ONS figures were “very different to previous data”.
Simon French, chief economist at investment bank Panmure Gordon, said the previous figures showing the UK at the bottom had damaged the UK’s reputation overseas, and the change was a “recent This casts serious doubt on the conclusion.”
Some economists excused the ONS changes, saying the pandemic was a period of great economic turmoil. “Measuring GDP during COVID-19 is very difficult,” said Julian Jessop, a fellow at the Institute for Free Market Economics.
ONS have There are several possible reasons for major revisions.
As of 2020, companies were producing goods and services and thinking they were building on their piles of unsold inventory, rather than using them up.
A larger revision was made in 2021, looking more closely at each sector’s inputs and outputs, rather than just looking at sales figures to guide the initial statistical release.
This is why some industrial sectors, such as steel manufacturing, are performing so poorly in new data. The ONS found that far more of the added value from producing iron, for example, comes from the energy used by that sector, and far less of the added value created by converting iron into metal.
In contrast, the wholesale and retail divisions rationalized their cost base during the COVID-19 period and generated more value than previously estimated.
Last year’s ONS data revision was about the same scale and went in the opposite direction. If we had waited until now, the two-year total would have changed much less.
Many other statistical agencies have not yet conducted a detailed analysis of GDP data for the COVID-19 period, and economists expect that these agencies are also likely to record significant revisions. There is.
EU data too indicating upward revision From early estimates in the corona era.
Eurostat had originally estimated the EU’s contraction rate for the year to the fourth quarter of 2020 at 4.8%, but this has been revised upward to 3.8%. In his next four quarters, his initial recovery forecast of 4.8% expansion was revised to his 5.2%.
In the United States, Latest analysis of revisions There is little bias in early releases. However, unlike European countries, they generally tend to revise their GDP growth rates downward.
Rupert Harrison, George Osborne’s chief of staff when he was chancellor, said British statistics tended to look worse than those in the US when they were first released.
“The economic recovery since 2010 has been revised upward repeatedly, while the US recovery has been revised downward. We now know that the growth in both countries was the same from 2010 to 2016, but at the time it was It wasn’t a story.”
This is a long-standing transatlantic trend. Before the financial crisis, Goldman Sachs had estimated that annual average quarterly growth rates had been revised upward by 0.7 percentage points in the UK, 0.5 percentage points in the euro area and downward by 0.3 percentage points in the United States.
Despite the scale of Britain’s broadly rosy revisions on Friday, economists warned that the overall picture of an economy struggling to grow and improve living standards remained unchanged.
Mr Gregory said: “The UK is likely to continue to suffer from labor shortages and this does not guarantee future long-term resilience.”
George Buckley, Nomura’s chief UK economist, said a strong past performance could limit the scope for future recovery. “With little catch-up, the risk of a recession in the UK could increase further in the future.” 1693671518 You should have it,” he said.