Sometimes, the economic numbers just don’t add up

Analysts and investors covet data released by governments but is it accurate?
The Mina Al Arab Lagoon Walk in Ras Al Khaimah. RAK's population figures were questioned by Standard and Poor's. Pawan Singh / The National
The Mina Al Arab Lagoon Walk in Ras Al Khaimah. RAK's population figures were questioned by Standard and Poor's. Pawan Singh / The National

In an information-hungry age, analysts, journalists and investors pounce on almost every bit of data released by governments for a window into economic performance.

GDP, inflation and trade figures are generally most eagerly awaited. But everything from current account to factory output figures are also pored over. It is perhaps no surprise, then, that the extra scrutiny sometimes also comes with a heavy dose of scepticism.

Anything released by China, the world’s second biggest economy, is often particularly fiercely analysed – and, sometimes, disputed.

Chinese GDP growth may be significantly overstated, found a study released in August last year by Christopher Balding, associate professor at Peking University’s HSBC Business School. He claimed that officials inflated China’s GDP by around US$1 trillion.

A report by the US-China Economic and Security Review Commission, a US government-sponsored body, in January last year similarly questioned the accuracy of China’s economic numbers. It blamed a lack of reform since the 1990s for the unreliability of the data. The Chinese government’s adjustment of its GDP data to account for seasonal variations were a rare example of an attempt to improve their robustness, the commission noted.

It is not just China and other meeting economies that have faced questions over the veracity of their data. The United States too has come in for criticism.

Almost every US economic indicator, ranging from GDP growth to employment to housing data, is incorrect when it is initially released, wrote Samuel Rines, an equity analyst and economist at Chilton Capital Management, a US investment adviser, in The Wall Street Journal in June last year. The data is revised to become more accurate over time but a lot of government and business decisions have been based on initially unreliable data, he wrote.

tarnold@thenational.ae

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Published: May 24, 2014 04:00 AM

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