Douglas Carswell's Blog

GDP data doubts

The Office of National Statistics has upwardly revised GDP data. This means that the economy is in slightly less worse shape than we thought. Good.

But how reliable are GDP stats anyhow?

If a farmer produces �100 of apples and sells them, it shows up as a �100 increase in national output. But if government spends �100 on something, that too shows as a rise in economic activity.

But is it? Does it really increase national wealth? Does it make our economy bigger, especially if the extra �100 of public spending is money we don't have?

A lot of what slender growth we have had in recent years has been due to the expansion of the public sector. Is that real growth?

Rising employment and falling GDP data a couple of months ago led a lot of pundits to speculate about falling productivity. I am not sure that is necessarily right.

I suspect that a lot of what we regard as GDP increases in recent years is phoney growth. Froth caused by the credit glut and higher state spending. It might cause the GDP data to increase on government spreadsheets. It does not amount to an increase in wealth creation.

As the malinvestment unwinds, perhaps a lot of the GDP "growth" from the boom years will turn out to have been froth? If so, how much will have to unwind?

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