By Michael Baxter
When the Office of National Statistics (ONS) revealed data to show the UK economy was contracting again at the end of last year, a lot of people were surprised.
So cast your mind back to January 2012, or 25 January to be precise. The UK's official statistical authority released data showing that the UK contracted by 0.2 per cent in Q4 2011. At the time, many economists said they didn't believe the data.
When the ONS updated its figures, many thought they would be revised upwards, but instead the data got worse — so much so that now the ONS has the UK contracting by 0.4 per cent in Q4 of last year.
But the puzzle related to the Purchasing Managers' Indices (PMIs). The PMI for manufacturing stood at 49.6 in December 2011, the PMI for construction stood at 53.2 and for services at 54. Markit, which was the co-complier of the PMI data, said that the figures were consistent with zero growth in the quarter. At the time many economists said that they thought the PMIs gave a more accurate picture.
Three months later, the story was even more puzzling. According to the ONS, Q1 2012 saw 0.3 per cent contraction. In March 2012 the manufacturing PMI stood at 52.1, the index covering construction stood at 56.7 and the index for services stood at 55.3. Markit said the data was consistent with growth of 0.5 per cent.
Even more economists said they thought the PMIs gave a more accurate story.
And yet the ONS data just carried on being bad. In fact, it finally recorded three quarters of contraction: Q4 2011, and Q1 and Q2 this year. It was a puzzle, all right.
Now forward wind the clock to today. The ONS recorded a 1.0 per cent growth rate in the quarter just gone. Yippee, thank goodness for that news.
Except the PMI for manufacturing in October was 50.6; for construction it was 50.9 and for services 47.5.
The fact is that when the UK economy was supposedly in recession Markit data suggested growth.
Right now it is consistent with contraction.
This article is ©2012 Investment and Business News, who also offer a fantastic newsletter that you can sign up for at http://www.investmentandbusinessnews.co.uk/