There are growing concerns about the reliability of key official statistics in both the UK and the US, including GDP performance, labor market data, and inflation measures. The response rate to the survey for employment and unemployment data has fallen in both countries, forcing the Office for National Statistics in the UK and the federal government in the US to seek alternative methods [c2ce88d0] [a2ed90f0]. The current rate of inflation is not a good indicator of future inflation. Money supply data shows contraction in the UK, the US, and the eurozone, leading some to argue that central banks have tightened monetary policy too much [c2ce88d0]. However, controlling the money supply is challenging, and the importance of stocks and flows is debated. The reliability of monetary data as a guide to inflationary pressures is also questioned [c2ce88d0]. Bank lending growth has dropped and turned negative. The Shadow Monetary Policy Committee recently voted for an immediate interest rate reduction, but the author believes more data, including money supply and bank lending, should be considered before making a decision [c2ce88d0]. The author criticizes the neglect of money supply by the Monetary Policy Committee and the shift in the belief that money doesn't matter in economic policy-making [c2ce88d0].
The concerns about the reliability of UK and US economic indicators have implications for the countries' economic recoveries. Unreliable data can hinder policymakers' ability to make informed decisions and implement effective measures. It becomes challenging to accurately assess the state of the economy, identify trends, and anticipate future developments. This uncertainty can undermine investor confidence and impact business decisions, potentially slowing down the recovery process [c2ce88d0] [a2ed90f0]. It is crucial for the Office for National Statistics in the UK, the federal government in the US, and other relevant institutions to address these concerns and ensure the accuracy and reliability of economic indicators. This will help provide a solid foundation for policymaking and support the countries' efforts towards a robust and sustainable recovery [c2ce88d0] [a2ed90f0].
UK housing and money supply data indicate potential economic downturn due to interest rate increases from the Bank of England. Mortgage approvals in the UK have sunk to an eight-month low following the rate jump [f3278da1]. This adds to the concerns about the reliability of economic indicators and raises worries about a downturn in the economy. The increase in interest rates has impacted the housing market and could have broader implications for the overall economic performance of the country. The combination of unreliable economic data and the effects of interest rate hikes creates uncertainty and challenges for policymakers in their efforts to navigate the recovery process [f3278da1].
The reliability of GDP statistics is a topic of discussion in the context of economic indicators. The International Monetary Fund (IMF) publishes GDP numbers that have passed their quality checks and can be trusted. GDP is measured in three separate ways: as the sum total of all spending in the economy, as the tally of all incomes made by households and businesses, and as the total value created in the economy. These three measurements must add up to the same number, providing a checkpoint to verify the accuracy of GDP data. The complexity and difficulty of forging GDP numbers require a large group of national accounts experts to even attempt falsification. When reputable statistics agencies publish GDP data, it can generally be taken at face value [e29486dc].
A study by the American Statistical Association (ASA) warns that U.S. economic data is facing serious concerns about its reliability. The ASA revealed that federal statistical agencies are increasingly facing challenges in producing relevant, timely, credible, accurate, and objective statistics. The report cited three critical weaknesses affecting statistical agencies: overdependence on political agencies for financial support, scarcity of manpower and budget, and insufficient decision-making power free from political guidance and interference. Unreliable data puts the nation's economic, social, and political future at risk. The ASA warns that immediate action is needed to ensure that federal statistics remain widely trusted and useful. The report is not the first major criticism of federal data, as significant revisions to jobs and GDP growth reports have resulted in serious waves of malinvestment. The ASA emphasizes that the real reliability crisis could be coming in the future if statistical agencies are not immediately held, funded, and staffed to higher standards [48821976].
Sources:
[c2ce88d0] - Bloomberg
[a2ed90f0] - The New York Times
[f3278da1] - Bloomberg
[e29486dc] - The European Conservative
[48821976] - SchiffGold