Key events
ONS warns over errors in growth figures
Richard Partington
The Office for National Statistics has warned there are errors in its growth figures after spotting problems with the price data it uses to calculate the size of Britain’s economy.
In the latest admission of failure to maintain reliable economic data, the government statistics agency said it had uncovered problems with two indices used to measure prices in the economy.
The admission will come as an embarrassment for the ONS as it battles to fix another key economic statistic, the flagship labour force survey, which provides headline unemployment and employment data.
Experts have warned these problems have left the Bank of England and the government “flying blind” amid reliability issues that could take until 2027 – more than three years in total – to rectify.
The ONS said its latest errors were uncovered during work to improve the systems used to create its producer price index (PPI) and services producer price indices (SPPI):
Our quality assurance identified a problem with the chain-liking methods used to calculate these indices.
Often referred to as “factory gate prices,” the indices are published with the ONS’s monthly inflation snapshot, and gauge changes in price for goods and services bought and sold by manufacturers and service-sector companies. The ONS said its headline consumer prices index, and another key inflation metric including housing costs, were “completely unaffected by this issue”.
However, it warned the PPI and SPPI data was used within its estimates for gross domestic product (GDP), regarded as one of the most important yardsticks in economics, which could force it to revise its data for 2022 and 2023.
The UK economy grew by 4.8% in 2022, in a rapid rebound from the Covid pandemic, and by 0.4% in 2023, as high inflation and interest rates weighed on output.
The ONS said the changes were most likely to lead to impacts on the level of GDP in some industries, and could lead to some revisions for the UK’s dominant services sector, as well as production and construction.
Despite this, at an aggregate level for GDP, these revisions should be offsetting to an extent, meaning there is unlikely to be an impact in the UK’s headline growth figures. The ONS also said early indications suggest that there would not be a notable change in the recent economic trends seen in the data.
The ONS said it was pausing the release of its PPI and SPPI data, with a plan to recommence publication in the summer.
The ONS apologises for the inconvenience caused.
Airline shares tumble on Heathrow fire
Airline shares have fallen as markets assess the fallout of the fire near Heathrow, which has forced the UK’s largest airport to close.
More than 1,300 flights are expected to be affected by the fire at the North Hyde electrical substation in west London, after a nearby fire triggered a “significant” power cut.
Affect flights include 679 scheduled to land and 678 due to take off.
Airlines have been diverting flights, though others like Air France are announcing cancellations, causing widespread travel disruption.
It has already caused shares in British Airways owner IAG to drop 4.1%.
Budget airline Ryanair is also down 1.25%, while rival EasyJet has tumbled 2.3%.
Follow the latest developments on the Heathrow shutdown here:
UK consumer confidence lifts in March – GfK Index
We also have GFK Consumer Confidence showing another uptick in morale.
The index rose for the second month in a row, edging upwards to -19 from a measure of -20. The new reaching represents a three-month high but is still below the survey’s long-run average of -10.
It adds to a mixed picture for Reeves, with the figures suggesting marginal improvements in the perception of the UK economy but that confidence is still fragile.
Neil Bellamy, consumer insights director at GfK said:
We are still below the long-term average of -10. If consumer confidence were a patient languishing in a hospital bed, a doctor would say there is little evidence of a recovery as yet. Where do we go from here?
The current stability is to be welcomed but it won’t take much to upset the fragile consumer mood.
Introduction: UK borrowing hits £10.7bn in February
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The health of Britain’s public finances is being closely watched in both Westminster and the City of London, just days before chancellor Rachel Reeves is due to deliver her spring statement on 26 March.
And the latest public finances data, just released by the Office for National Statistics, shows that the UK borrowed more than economists expected last month to balance the books.
Public borrowing hit £10.7bn in February, higher than the £6.6bn forecasted by City economists.
It illustrates the scale of the challenge facing Reeves, who is due to announce cuts to spending, alongside fresh economic and public finance forecasts from the Office for Budget Responsibility, next week.
The ONS said that overall, government borrowing hit £132.2bn in the financial year to February, which is £14.7bn more than the same period a year earlier
Alex Kerr, UK economist at Capital Economics, said:
Although they will have no impact on the fiscal update next week, the significant overshoot in borrowing in February highlights the Chancellor’s tight fiscal backdrop. The OBR will still most likely conclude that the chancellor’s headroom against her fiscal rules has been wiped out.
So we expect her to announce further non-defence spending cuts, on top of the welfare cuts already unveiled earlier this week.
