Economists are expecting the Office for National Statistics (ONS) to revise upwards its figures for UK economic growth in 2012 later this year, following the decision to include more data in their calculations.
The ONS said last week it would revise its figures for economic growth for 2012 in September this year after having incorporated a wide range of extra data sets on UK economic activity.
Economists said the new figures would probably result in an increase in the GDP measure from the 0.3 per cent originally recorded, due to a significant increase in productivity. Several economists said the ONS had previously been consistently underestimating this element of economic growth.
Last year, revisions to growth data meant the UK did not experience a technical recession in 2012, but economic growth was minimal during the year as the country suffered the knock-on effects of the eurozone crisis.
The news of an upward revision to growth came as the statistical body also revealed plans to change the accounting practices it uses to measure key economic indicators such as GDP, savings ratios and government debt.
However, Simon Ward, economist at Henderson Global Investors, said the upward revision to growth figures was more important than the change in calculations, as it could “potentially make the recovery look stronger and make productivity look better”.
The lack of growth in labour productivity in recent years has puzzled economists, but Mr Ward said an upward revision could “partially justify the relative optimism” on productivity he has seen recently from the Bank of England and the Office for Budget Responsibility.
Stephen Bell, chief economist at F&C Asset Management, said he would not be surprised by a significant upward revision in growth because he has long thought “the ONS was seriously underestimating economic growth”.
He said he did “not believe the low productivity growth was entirely correct” in previous figures.
Mr Bell said the Bank of England had consistently estimated higher UK growth because it was using other data sources, such as purchasing managers index (PMI) data, which the economist argued was “more reliable” that the GDP estimates from the ONS.
However, Andrew Wharton, assistant deputy director at the ONS, said it was not a foregone conclusion that the extra data would result in an upward revision to GDP.
He said he had “no idea” what the revision might do to the growth calculation for 2012, but that he was “not convinced” that it would be revised upwards, given the impact of the new data sets on growth in previous years.
The ONS is also preparing to change its accounting measures to bring them in to line with international standards used by other major economies.
The changes will mean including research and development work and the weapons-building industry as part of the UK’s official output.
However, the changes could also increase the level of the country’s national debt by more than £100bn, the ONS said, as it will bring Network Rail’s debt on to the government’s balance sheet. It will also alter the way the government’s stakes in Lloyds Banking Group and Royal Bank of Scotland are calculated.
Mr Ward said the changes should “in general” make the UK economy look better, and played down the timing of the move, just a year before the next general election.
The ONS is planning to include future income from defined benefit pension schemes into its calculation for households’ current savings, which the ONS said would increase the savings ratio by around 5 percentage points, doubling
