Office of Numpties and Scaremongerers?

An an economist's job is a very difficult one indeed. You don't want to be the odd man out with your predictions, and yet predictions is your game - and indeed your paycheck.

So how to balance the needs of being right with being seen to be right? it is a common city conundrum that affects everyone from Hedge Funds Managers to Pension managers.

In the world of economists this means closely watching the relevant statistics as they come out, Purchasing Managers Index, Consumer Confidence, Business Confidence etc. The use your advanced excel skills to create a nicely complex model to spit out your opinion of, say, GDP growth.

Once you have this base material you can check it against what every other economist is predicting and move it up or down depending on your hunches and also just check that it is is near consensus, but hopefully not bang on.

Collect paycheck.

So yesterday was a bit of a shock, as GDP cam in 0.3% below consensus and nearly every City economist was wrong. of course, due to the herd behaviour described above, if there is a material difference then it is likely that many will be wrong when the numbers are a miss.

However, the first few months of this year were pretty good and the all the information available suggested pretty strong growth, certainly enough to lift the Country out of recession.

But the Office for National statistics just has not been the same since the move to Wales. As part of the last Government's strategy, the department was moved to Wales. Lot's of people left, not wanting to follow and the quality of its data has fallen. Construction in particular is very variable, out by 1-2% each time, which is huge - more than enough to turn yesterday's GDP positive if it proves to be wrong.

This is why the City analysts are all wrong and, as noted in the Telegraph today, why the Bank of England uses its own model (one has to ask, the cost of this, having two departments of Government do the modelling...).

It is quite a problem though as all these movements in statistics really matter today and when they are all changed to be more accurate in the future, people care less. A root and branch review is necessary of the ONS to try and get some better accuracy in the first place, or even a review on how soon data is released so as to allow them more data gathering time to allow a more accurate first cut.