Are politicians misleading us as to how strong economic recovery has been in 2021 or should we trust them?
Lies, lies and more lies refers to the misuse of statistical data to put across a viewpoint that could be inaccurate or perhaps less than truthful. According to Investopia.com “statistics is the study and manipulation of data, including ways to gather, review, analyze, and draw conclusions from data”. Assessing comments currently being made about the 2021 economic growth rates as defined by Gross Domestic Product (GDP) we are bombarded by claims and counter claims as to how well the global economies, particularly China, the EU, the UK and the U.S. are performing.
Much depends on what is being compared. Be it year on year, quarterly, monthly or pre pandemic as the base against which growth or decline is measured. Currently, the best results of defining growth is to look at 2021 vs 2020 in order to highlight how well economies are doing now that COVID-19 is being swept aside. This brings us face to face with data manipulation as 2020 was at the depth of economic decline for the first six months due to the pandemic. 2021, from the second quarter on, with intermediate growth, statistically was a great year, the best in 30 years or more for most of the major economies other than China. The UK reported year on year growth of 7.5 per cent. Last years’ decline was the worst since 1921 which means that any growth in 2021 would look spectacular.
The U.S. and the EU are similarly boasting about high growth over five per cent, but when we look at the details on a quarterly basis, the best vs worst quarters have very high growth rates. However, when comparing the Quarter 4 data we see a different story as recovery had started by mid-2020, the growth rate in the UK was only one per cent vs 1.7 in the U.S. The reality is that the statistics allow us to choose whichever scenario we wish to present. Politically, now is the time for the less than accurate year on year comparisons. Perhaps 2021 should be compared with 2019, the year before the pandemic to give a better estimate of recovery.
This leads us to projecting 2022 GDP growth. It will most likely be very much more subdued than last year and adding inflation into the basket there are storm clouds on the horizon.
