Letter for publication in response to an article in the Independent, 19 July 2012.
Issue date: 20 July 2012
Type: Letter to the Press
Hamish McRae's article of 19 July says "Our economy is now around 4 per cent bigger than it was last year, yup, 4 per cent". This is potentially misleading. In an article arguing that we are not in recession, readers might naturally interpret this as suggesting that current estimates of growth might be revised up by a similar amount in the future.
The 4 per cent figure appears to relate to revisions to the level of GDP in 2010 relative to 2000. This change reflects improvements to our methodology that were fully pre-announced and explained last year. They were widely welcomed and bring the UK into line with international best practice. Principally, the changes stemmed from moving, in October 2011,from using RPI components as deflators to using CPI components. But the revision to annual GDP growth in 2010 alone is much less, at 0.4%.
In terms of how the current estimates might be revised in the future, past performance suggests that, leaving aside methodological changes, revisions are equally likely to be in either direction. Some methodological changes do have an upward effect, as in the case of the move from RPI to CPI based deflation. Others go in the opposite direction. So to use the impact of a single methodological change as an indicator of the size and direction of future methodological revisions would be without foundation.
Office for National Statistics