Many commentators have speculated on the possible impact of coronavirus (Covid-19) on the UK and global economies. For example, on 14 April the Office for Budget Responsibility (OBR) published a possible scenario for UK economic growth, the public finances, inflation and unemployment. Other sources have considered the possible effect on trade and other economic variables, and provided alternative views on economic growth, inflation and unemployment.
However, most of the official data on the economy is only produced with a lag, making it difficult to assess the current economic impact of the virus accurately. In addition, the Financial Times (FT) suggested that disruption caused by the virus has made it more difficult to collect accurate statistics.
This blog looks at ways in which the Office for National Statistics (ONS) has adapted its output, and at other economic measures that have been used or proposed in a UK context. It also considers how other countries are approaching the issue, and what information might be available from countries that were impacted by coronavirus at an earlier stage.
There has been criticism about the quality as well as the timeliness of existing economic indicators. For instance, economists Charles Goodhart and Manoj Pradhan have argued that the coronavirus outbreak would make it “almost impossible” to put together meaningful inflation data. Inflation is usually measured by collecting prices from retail locations, the internet and over the phone. Some prices, for example air fares, have largely disappeared. The FT also suggested that the ONS will struggle to process any information collected because its staff will be working from home.
The ONS has produced a new set of weekly statistics in response to the coronavirus situation. It describes these as “experimental”, meaning that they are not fully developed and should be treated with caution. They derive from three new sources:
- a ‘business impact of coronavirus survey’ (BICS). The survey covers business turnover, workforce, producer prices and trade;
- an ‘opinions and lifestyle’ survey, which is designed to “help understand the impacts of the coronavirus pandemic on people, households and communities in Great Britain”; and
- weekly online price indices for “high demand products”.
Headline results from the 16 April 2020 data release included:
- 25% of responding businesses reported that they had closed or paused trading during the survey period of 23 March to 5 April.
- For businesses still trading, an average of 21% of staff had been furloughed.
- 53% of individual respondents said that the coronavirus was affecting their wellbeing.
- Online prices of high demand products increased by 1.8% in the period 6 April to 12 April, compared to the week before. This followed a 1.5% rise in the previous week’s data.
The FT also reported that the ONS is developing a further survey to provide more detail on the labour market and unemployment.
Even before the coronavirus, the ONS was developing faster indicators of UK economic activity. It had initially used VAT returns, road traffic sensor data and shipping information. It reported information for February 2020 on 24 March 2020.
The director general of the UK Statistics Authority has endorsed the new ONS indicators, following a “rapid regulatory review”.
The FT has suggested a series of other indicators to monitor economic developments more quickly. These include:
- electricity consumption;
- property market data;
- car sales;
- applicants for benefits such as universal credit;
- data from websites that cover particular parts of the economy, for example: job hiring and vacancies through LinkedIn and Indeed; and hours worked as reported on technology sites used by workers in the hospitality sector; and
- mobility data from location trackers such as Google.
However, if data is collected directly from smartphones, concerns have been raised about privacy and about information possibly being obtained by hackers.
Other analysts have quoted purchasing managers’ indices (PMIs). PMIs are intended to be forward-looking indicators of the health of private sector companies, derived from surveys of senior executives. In its latest economic commentary, accountant and consultant Deloitte reported that PMIs for Europe fell to record lows in March. Deloitte also considered other measures, such as: retail footfall; box office sales; public transport usage; and street congestion.
Other countries have also been developing faster response indicators. For example, the New Zealand Government is collecting data on movements of people and freight, border crossings and electronic card spending. The FT has compiled data for China based on data such as: traffic congestion; coal consumption in power plants; container freight and real estate floor space sales.
Information from countries that suffered from coronavirus at an earlier stage may also be useful for assessing the possible future path of the UK economy. For example, estimates of growth and of manufacturing output in China suggested a return to growth in March. These followed what the FT described as “some of the worst official figures ever reported by China” relating to February.
However, analysts have expressed doubts about the accuracy of some Chinese data. There are also reasons why experiences in one country might not be mirrored elsewhere. These include differences in the form of the response to the virus, and cultural differences between the economies.
- House of Commons Library, Coronavirus: Latest Economic Data, 16 April 2020; and ‘Economic update: coronavirus brings recession’, 2 April 2020
- Office for Budget Responsibility, ‘Coronavirus reference scenario’, 14 April 2020
Image by Ruthson Zimmerman from Unsplash.