Getting the message on the real economy
It is intriguing that survey findings, like yesterday's offering from the British Chambers of Commerce, and anecdotal data such as last week's report from Marks & Spencer, suggest strongly that the country is already in recession.
This, however, is not the message from the official figures, which raises an interesting question. When the figures say one thing and you see something else, what do you believe? Or, as a reader mischievously put it in an email, if it requires a survey of businessmen to tell us what is happening in the economy, what is the function of economists?
There is, however, a deeper point here, which is that economic data does seem consistently to paint a rosier picture of the economy than one experiences from living in it. In some ways it was ever thus.
I sometimes thought I inhabited a parallel universe when Gordon Brown used to speak on Budget days. He would boast how he presided over an economy with the lowest unemployment for 30 years, the lowest interest rates for 50 years and the highest growth rates in the Western world - whereas I lived in an economy with a colossal balance of payments deficit, a growing army of unemployable school leavers, crumbling infrastructure and an unhealthy dependence on financial services.
But perhaps, more importantly, there is something wrong with the figures. It is quite easy to see how this might happen. The state accounts for some 40% of economic activity in this country, and presumably the statisticians have to take a view on the extent to which this spending delivers growth.
Does £100 spent in the National Health service delivers £100 of value, or £103, or possibly £97? If it is the higher number, that would boost economic growth. if they were allowed to put in a lower number, it would be a drag.
If they inferred that NHS spending added value when in fact some of it was wasted, this would overstate the rate at which the economy was growing. Or if people paid more council tax but ended up with the same or poorer services - a not uncommon experience - it is possible that the increased income of the councils would translate in the statisticians' eyes into an increase in gross domestic product.
Even if we can believe the raw growth figures, there is potentially another problem arising out of the inflation number. The Retail Prices index and the Consumer Prices index are useful for measuring the trend in prices over time but they are less convincing in their measure of the actual level of inflation, which most people feel currently is perhaps 3% higher than the officially quoted rate.
This, again, would impact the real rate of economic growth as economists would knock 3% too little off the nominal-GDP to calculate the real GDP as a result of underestimating inflation. This highlights, if nothing else, how difficult it is to measure what is really happening in the economy as it happens. But that should remind us to treat the figures with caution.
Faced with official statistics or a survey from the real world of business, the survey is likely to be closer to what is actually happening.
Change on the markets front
The London stock Exchange had its annual meeting today, and it may have been coincidence or it may have been deliberate that one of a growing number of competitors, Plus Markets, thought yesterday would be a good day to report on its progress.
It is fascinating how fast the landscape is changing. Just a year ago, the London stock Exchange could claim still to be preserving its monopoly. Now it has been breached on three fronts - listings, trading and data.
Plus, a relatively new exchange focusing on small and mid-cap companies, has already had its first independent listing, a company called Mears, and there are others in the pipeline.
The significance of Mears is that, while the Financial Services Authority approves listings, after that companies have to join an exchange, and until recently the LSE was the only one available. the loss of the monopoly in trading is more marked and Chi-X and Plus have both taken a slice of the market - though the LSE argues Chi-X in particular has actually brought in new business.
Turquoise, when it launches in autumn, will bring a further challenge, and is likely to precipitate a price war. And by this time next year, Plus Markets' Simon Brickles predicts that his market will have more than half the trading in AIM stocks. We shall see.
Finally, there is data. As markets fragment, so the data feeds multiply. indeed, there is now a need for a consolidating tape to pull it all together again into a single feed. that, as they say, is progress.
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