| LONDON, April 25
LONDON, April 25 Britain's Office for National
Statistics is on the defensive after publishing figures showing
the UK is back in recession - something disputed by the Bank of
England and many economists, who say the data understates the
true strength of the economy.
The quality of the ONS figures released on Wednesday is
highly significant as the bad news may hurt business and
consumer confidence, which is still fragile after the worsening
in the euro zone debt crisis late last year. In addition, the
BoE needs a solid basis in order to decide whether to give the
economy another cash boost in May.
Doubts centre around the extreme weakness in construction
shown by the ONS data, which the Bank of England has called
perplexing. Anaemic services growth also puzzled many economists
as surveys continue to paint a more positive picture.
But ONS chief economist Joe Grice defended the ONS's
numbers, which showed a 0.2 percent drop in gross domestic
product, confounding economists' forecasts for 0.1 percent
growth, as construction slumped 3.0 percent on the quarter.
"We have no reason to suspect that these figures are any
less reliable than would usually be the case," he told reporters
at a news conference in central London.
"We have a very large set of respondents to base our results
on - 40,000 for the economy as a whole and for construction
alone I think it's about 8,000," he said. "We go through our
returns carefully, we go back to respondents and if anything
looks odd, we question it, sometimes several times."
But he pointed to the fact that the GDP figures released on
Wednesday were preliminary and could still be revised. Revisions
are normally in the order of plus or minus 0.2 percent, he said.
However, this did not lessen the doubts of economists and
private-sector survey compilers. In 2009, when the ONS's first
estimate for the third quarter had shown a 0.4 percent quarterly
contraction, the data was later revised to show a 0.2 percent
"As was the case three years ago, there is a worry that by
heralding a double-dip recession, misleading, gloomy official
data shatter the revival of consumer and business confidence,"
said Chris Williamson from Markit, compiler of the Purchasing
Managers' Indices (PMI), which showed solid growth.
The CBI business lobby's quarterly survey of manufacturers -
also published on Wednesday - showed the most upbeat assessment
of the business situation in a year.
CBI Director General John Cridland called the GDP data "a
"In particular, the weakness of the services sector data
does not tally closely with a range of survey indicators
suggesting that the sector has been picking up through the first
quarter," he said.
Official data showed only a 0.1 percent rise in services
while the services PMI had indicated growth of some 0.5 percent.
Many City economists were also irritated. "Our reaction is
one of disbelief - these figures just do not fit with our
experience of the market," said Andrew Goodwin, senior economic
advisor to the Ernst & Young ITEM Club.
The Bank of England has taken a different view of growth
than the ONS in the past, pointing to evidence in an analysis in
its August 2011 inflation report that weak early estimates of
growth tended to be revised up by more than strong ones.