The UK’s Office for National Statistics will struggle to produce the country’s most important economic data accurately in the months ahead because the coronavirus lockdown has undermined its normal survey methods.
The agency’s figures for the depth of the coming recession, increased unemployment and the rate of inflation will all be hit, making it harder for policymakers to get a sense of vital economic trends and respond with policy ideas.
So far the Treasury and the Bank of England have mostly been setting policies such as the chancellor’s job retention scheme blind to the precise economic environment.
The best data have come from private sector sources, showing real-time indicators of sharp declines of business in restaurants, shops and the transport sectors alongside a huge increase in claims for universal credit benefit.
Even though its data generally come with a lag, the ONS wants to provide an up-to-date snapshot of the whole economy in the coming days and weeks. Jonathan Athow, director-general of economic statistics at the agency, said its aim was “to make sure decision makers get the data they need”.
He revealed that because many of the agency’s usual data series would not be providing timely statistics, and the coronavirus outbreak was making it difficult to collect some information, the ONS had set up three representative online surveys which it hoped would provide useful economic information quickly.
One, seeking the views of 20,000 companies on how coronavirus was affecting company health and supply chains, is already live and will publish its first results on Thursday.
The second survey will aim to get up-to-date information on the labour market and unemployment, providing more granular information than the daily counts of claims of universal credit, on which the agency’s statistics are currently based. The third will seek information on the public’s attitude to coronavirus and their likely response.
However, the agency’s key economic data are likely to be highly compromised by the spread of the disease and difficulties in processing information now that the vast majority of ONS staff are working from home.
Collecting unemployment statistics, for example, will prove challenging because much of the Labour Force Survey, which underpins the data, is gathered face to face, which the ONS said improved response rates.
Danny Blanchflower, professor of economics at Dartmouth College, said the way the UK compiled its unemployment measure meant it was not fit to help policymakers gauge the level of joblessness during the pandemic.
He compared this with the weekly new jobless claims statistics in the US, which have allowed him to estimate that the unemployment rate there has risen as much in a couple of weeks as it did in the whole of the 2008-09 financial crisis.
“We won’t have a clue about UK unemployment until about June, even if the data was accurate,” he complained, adding that this was a “disaster” for policymakers because they needed to know how much of a hole the labour market was in, “to know what is needed to climb out”.
Inflation rates will also prove problematic. Mr Athow said that March data due to be published later this month would go ahead as usual, but after that, the ONS would not be able to send out its usual army of price collectors to compile information from shops that are shut.
The statisticians have said they will use online prices where this is feasible, but might need to impute others or assume they have not changed to produce the series. Prices on items such as air fares will be particularly difficult when the market is not functioning normally, with flights having largely stopped apart from for repatriation.
“It’s a nightmare for them and they are legally mandated to produce the retail prices index,” said one analyst.
For the vital national accounts, which include gross domestic product and will illustrate the depth of the recession, the problems will not become apparent until May because of a lag in the data.
Mr Athow said the ONS would have to use a lot of judgment to produce first estimates of movements in the whole economy, and was mindful that in 2008, his predecessors erred by not believing how bad the initial data were and initially overwrote them with more favourable assumptions.
This meant the ONS failed to give any warning sign of the economic effects of the financial crisis until late 2008, even though later data showed the recession had started at the beginning of the year.
This year the agency expects to see the emergence of contradictory signals, with output and expenditure down, but income holding up, and Mr Athow said it had committed to putting “the highest weight on the data with the most strength” to infer what had happened to the economy in the coronavirus crisis.
Source: Economy - ft.com
