Economists question stats reliability

RENEWED questions about the reliability of official statistics emerged today after industry figures appeared to confirm that Britain‘s manufacturing sector is firmly on the road to recovery.

The highly-regarded CIPS Purchasing Managers' Index, which draws together data from a series of separate indices to measure overall activity, rose in May for the 11th consecutive month. The results are in stark contrast to official figures that appear to show the sector in decline.

The Office for National Statistics (ONS) said last week that manufacturing output fell during the first three months of 2004.

HSBC economist John Butler described the contrast between the two sets of figures as a mystery. He declared: 'This simply broadens the puzzle between the survey evidence and official data. The persistence of the gap and evidence of a global industrial recovery is starting to cast serious doubts over the reliability of the official data.'

Butler said the figures would raise confidence about an industrial recovery, particularly since a separate CBI survey last week showed manufacturers reporting the highest balance on their order books since February 1998.

Concern at the disparity between official statistics and those produced by other organisations echoes the row over official inflation data two years ago which led to accusations of political interference.

Chris Williamson of NTC Research said he too was puzzled as to why there remains such a wide gap between various survey data and those from the ONS.

He speculated that part of the gap may be explained by a 'steep downturn' in new orders for investment goods that CIPS has recorded compared with the beginning of the year.

But that should have been offset by a buoyant consumer goods sector that is being fuelled by still relatively low interest rates and near-unstoppable demand from the British consumer, not to mention strong overseas demand as the world economy recovers.

'As to why the ONS is not picking up this consumer goods growth we don't understand,' Williamson added.