Does the state of the British economy justify the safe-haven status of the government gilt market?
The official output data has recently been enough to confuse and worry even the most stout-hearted. It has suggested that the U.K. slumped into double-dip recession at the end of last year, before abruptly recovering to grow at the breakneck speed of 1 percent quarter-over-quarter from July to September — the fastest rate in five years.
This stop-start picture is not reassuring. Growth is key to the credibility of ambitious government plans to close the fiscal deficit. However, even after spectacular third-quarter figures boosted by the London Summer Olympics, the official statistics show the U.K. economy slightly smaller than a year ago.
Hope springs from mistrust: Analysts argue that it has become increasingly dangerous to rely on U.K. gross domestic product (GDP) numbers. Research by private-sector economists suggests that having published the figures for each quarter earlier than most other leading economies, the U.K. authorities are then forced to spend much of their time disowning their original off-the-mark estimates — with an average revision of about 0.4 percentage points for each figure, measured from first to latest assessment. Many economists believe that future reassessments of this order will revise away the recent recession into oblivion. Defenders might argue that the initial estimate of GDP data is only meant to be the first rough draft of economic history, but it has been a very rough first draft indeed — no better than doggerel to its critics.....