LONDON (Reuters) – Economic output figures could soon come with error ranges around them, to better capture uncertainty around an historic slump that is expected to follow Britain’s coronavirus shutdown, statisticians said on Monday.
British gross domestic product figures were significantly revised during and after the 2008-09 financial crisis, and budget forecasters have already said this year’s plunge in the economy could be even bigger.
“Depending on user feedback, we could implement the proposed confidence intervals around the latest estimates of calendar quarter GDP, which would be a marked departure from how we have previously communicated data uncertainty,” the Office for National Statistics said.
A confidence interval represents the range within which the true value of a data estimate is believed to lie, providing a given degree of certainty, commonly 95%.
There is little precedent for countries publishing confidence intervals for headline GDP numbers, though the ONS already gives confidence intervals around some labour market, migration and population data.
Data revisions tend to be larger than normal at turning points in the economy.
During the global financial crisis, official data initially showed Britain’s economy began to shrink in the third quarter of 2008, rather than the second quarter as shown later. They also incorrectly stated a new recession in late 2011.
Turning points are hard to measure because of changed patterns in how businesses respond to surveys and difficulty judging whether a sharp move represents temporary volatility or real change.
“This is likely to be particularly relevant over the next year in light of the recent shocks to the UK and global economy following the coronavirus (COVID-19) pandemic and the wider containment effort,” the ONS said.
Prime Minister Boris Johnson said on Monday it was still too risky to relax Britain’s lockdown, imposed to try to curb the spread of the coronavirus.
The ONS said it would continue to state when the economy entered a ‘technical’ recession where there are two consecutive quarters of falling output, a simple definition widely used across Europe.
But it said this definition was sensitive to revisions in output, and that it was better to look at a mix of measures such as unemployment, household incomes and retail sales, as done by the United States’ National Bureau of Economic Research.
The ONS said it would declare recessions only based on calendar-quarter figures, and not monthly GDP data introduced since 2008-09. Regional GDP data was also too volatile to declare recessions in parts of the United Kingdom.
(Reporting by David Milliken; Editing by Catherine Evans and Timothy Heritage)