ONS reports that ONS actually quite good at estimating GDP

Estimates rarely change that much, but have got worse since the crash.

A new study by the ONS (pdf) on the practice of revising quarterly GDP reveals that, despite some high-profile revisions, they are actually doing pretty well.

The current practice for GDP figures is to release a preliminary estimate 25 days after the quarter ends, then update it for a second estimate a month later, and release a final estimate shortly before the next quarter ends – before starting the whole process again. Even after the "final" estimate is made, there's the possibility of still more releases:

As further data become available there are potential revisions to the quarterly GDP figures in subsequent QNA releases, as well as in the annual national accounts Blue Book publication.

The Blue Book process enables annual data to be balanced at a much more detailed level and is also the opportunity for major methodological changes to be introduced.

Whenever the preliminary estimate delivers surprising news – as it did with the most recent results – there is always a rush to point out that these estimates are usually revised (as indeed they are). But the overall picture remains remarkably accurate. The following chart compares the GDP growth given in the initial estimate to the final estimate given five years later.

 

There are some pretty large changes month-to-month, but only one revision in the last 20 years which changed the big picture in any substantial way (the near-collapse in growth in early 1998 actually appears not to have occurred).

Even when the whole period is covered, the authors conclude:

In broad terms the picture of growth in GDP over the period from 1961 to 2012 quarter two is similar, irrespective of the maturity of data, although there are some exceptions. In particular the differences caused by revisions in the late 1980s were previously discussed in Brown et al, where a period of consistent upward revisions led to the Pickford Review (1989). The review implemented a number of methodological changes including the publication of a single measure of GDP.

But what about the most recent period of recession and recovery?Has the ONS got worse at making those initial estimates due to the changed economic circumstances?

Maybe.

The below chart shows the absolute revisions to GDP estimates in the first two years. The Pickford review of 1989, which changed the methodology substantially, clearly worked, reducing the mean revision from a change of at least 0.5 points to one of barely 0.2 points. But while there was a period of unprecedented accuracy in the late 1990s and early 2000s, things have got marginally worse recently – even while staying significantly better than they had been two decades before.

 

As a result, the review concludes that:

There is some evidence that in the latest periods, the size of revision has increased [although not significantly]. . .

It is possible that the assumptions and methods underpinning the early estimates of GDP may not be as robust in periods of greater volatility or at turning points in the economy as they were during the long period of stability from 1992 to 2007.

The most important thing to note, however, is that there is no significant trend for the direction of the revision. Although it's usually positive, it hasn't been recently:

 

So if you are hoping that a GDP estimate will be revised, be careful what you wish for – it may not go the way you hope.

GDP percentage growth, quarter on same quarter 1 year ago - estimates.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”