A week ago, the UK’s Office for National Statistics (ONS) published its review of UK gross domestic product (GDP) growth for its annual series. What is interesting is the data for 2022, considering the size of the revision, no more and no less than 2%. This means that, according to the ONS, the country’s GDP in the year ending nine months ago was actually 2% higher than expected in March.

The news published with the review aroused great interest in our country, especially since soon, on September 18, the same was expected…

A week ago, the UK’s Office for National Statistics (ONS) published its review of UK gross domestic product (GDP) growth for its annual series. What is interesting is the data for 2022, considering the size of the revision, no more and no less than 2%. This means that, according to the ONS, the country’s GDP in the year ending nine months ago was actually 2% higher than expected in March.

The news published with the review generated great interest in our country, especially since soon, on September 18, a similar update is expected by the National Statistics Institute (INE) for Spain’s GDP. This review, in response to the actions carried out every September, is of particular relevance on this occasion because of the expectations regarding its potential. Data published by the ONS further increases these expectations.

But before discussing the reasons for this expectation, it is useful to understand why this review was conducted and what its implications are. In short, this revision is necessary because the information available regarding economic activity in a particular year is not the same 90 days after the end of that year (end of March) as 9 months later.

More specifically, in the current year, current GDP developments are measured using a statistical method called quarterly accounting. This method uses indirect information based on economic indicators, such as industrial production or retail sales indices, to estimate the evolution of a sector’s gross value added and, therefore, the economy’s GDP in a given quarter. When data is calculated for the last quarter of a year, in March of the following year, the sum of the four quarters gives us GDP for the year that has ended. So, last March we already knew what GDP 2022 would be. Or at least a preliminary estimate.

However, throughout the following year, surveys continued to be collected that took time and effort to complete, but increased the information available from simple indicators. With this new information, the March forecast should be revisited to get a second estimate that is slightly closer to the final estimate. This is what is done every September.

Typically, INE does fairly moderate reviews. Several years later, the data only confirmed the March data. At other times, the revisions are quite large, but rarely exceed half a point per year. However, the highest expectations are for data for 2022. After the pandemic, the models used to measure quarterly economic activity are under considerable pressure. Some activities are difficult to evaluate using traditional methods. In addition, policy and regulatory changes, such as those relating to taxation, as well as unexpected events, such as the invasion of Ukraine, led to a disconnect between certain previously used indicators and the final data published by INE. This disconnect may be relevant in 2022, so many people are anticipating a correction in the GDP increase based on information recently provided by the Tax Agency and other structural surveys published throughout this spring and summer.

Despite the magnitude of the review carried out, it is important to underline that the review is a response to a technical procedure carried out within the framework of the methodology established by the international organization, for which information and justification are provided. This point needs to be emphasized, even harshly, because recent criticism has been leveled at statistical organizations over changes in methodology that have been common and explicit over the years, but which for some indicate a lack of clarity in the process for adapting the numbers to the wishes of the public. ministers and executives…

What can we expect on September 18? Actually, I don’t know. INE will make the final decision, and it will certainly be highly justified based on the data collected and the methods used. As I’ve pointed out, many expect a broad correction, even above 3%. This would be extraordinary, but data from the UK makes it a possible option. Whatever it is, it will not leave anyone indifferent. And what we will not stop seeing are the proclamations and criticisms launched against procedures that have been carried out since the world (national budget) was still the world.

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