City blasts 'too gloomy' data
THE Office for National Statistics is under fire from City economists increasingly frustrated with the quality of official economic data.
They say the widening gulf between gloomy ONS manufacturing figures and upbeat survey evidence is making it impossible to tell how well the sector is faring. It also makes it harder for the Bank of England to make interest rate decisions.
The latest snapshot of manufacturing from the CBI shows factories firing on all cylinders as order books swell to their fattest for six years. The findings mirror surveys from other organisations such as the Chartered Institute of Purchasing and Supply and the British Chambers of Commerce. In stark contrast, the latest ONS figures show the sector in recession.
Economists believe the picture painted by surveys is more accurate and there are indications that the Bank does too. The minutes of the monetary policy committee's last meeting said the Bank's regional agents reported manufacturing output and orders 'had continued to rise steadily'.
Meanwhile, the Inflation Report stated that the MPC 'places some weight' on survey evidence. Senior ONS staff are understood to have given a presentation to the Bank in recent weeks to address concerns.
Ross Walker at Royal Bank of Scotland said: 'The weight of evidence is shifting more in favour of surveys and my feeling is they will hold greater sway in terms of policy over the next few months.
'The frustrating thing is that the ONS does not know why this discrepancy is happening. They are the ones who collect the data so the onus is on them.'
John Butler at HSBC said: 'It makes no sense that UK manufacturing is doing worse than the eurozone's when we have had a consumer boom. The issue is starting to cast a shadow over the reliability of official data.'
But Andrew Walton, the ONS statistician responsible for official industrial production data, insisted his numbers were accurate.
'We started an investigation not because we were worried about the robustness of the data but because we wanted to get to the bottom of the discrepancy,' he said. 'We haven't found anything to suggest our numbers are any less reliable than normal and we are confident they are superior in terms of sample size and coverage.'
The dispute is the latest in a series of embarrassments for ONS chief Len Cook, who was last year forced to revise official data to give a substantially different picture of Britain's growth performance over the past five years.
However, Paul Dales at Capital Economics, believes the ONS will be vindicated. 'There is a tendency for producers to be too optimistic or pessimistic at turning points in the business cycle,' he said.
