Tag: #ons

ICAEW chart of the week: Inflation

My chart for ICAEW this week illustrates how core inflation has only dropped from 6.3% in December 2022 to 5.1% in December 2023, even as the headline rate has come down from 10.5% to 4.0%.

Two step charts under the title 'Inflation'. Step chart 1: 2022 (12 months to Dec 2022) Core inflation +6.3% (corresponding to 5.0% in height) + Food prices +16.8% (height 1.8%) + Alcohol & tobacco +3.7% (height 0.2%) + Energy prices +52.8% (height 3.5%) = CPI all items +10.5% (height 10.5%) Step chart 2: 2023 (12 months to Dec 2023) Core inflation +5.51% (height 4.0%) + Food prices +8.0% (height 0.9%) + Alcohol & tobacco +12.9% (height 0.5%) + Energy prices -17.3% (height -1.4%) = CPI all items +4.0% (height 4.0%) 18 Jan 2024. Chart by Martin Wheatcroft FCA. Design by Sunday. Source: ONS, 'Consumer price inflation, UK: Dec 2023'. (c) ICAEW 2024

On 17 January 2023, the Office for National Statistics (ONS) published its latest consumer price inflation (CPI) statistics for the 12 months to December 2023, reporting that headline inflation has fallen to an annual rate of 4.0% compared with 10.5% a year earlier – a more than halving of the annual rate of price growth.

This contrasts with CPI excluding energy, food, alcohol and tobacco (typically described as core inflation), which was 6.3% and 5.1% in the 12 months to December 2022 and 2023 respectively.

The left-hand side of my chart this week illustrates how core inflation in the 12 months to December 2022 of 6.3% contributed just under 5.0% to the weighted average total inflation rate of 10.5%, with food prices up 16.8%, alcohol and tobacco up 3.7%, and energy prices up 52.8% contributing a further 1.8%, 0.2% and 3.5% respectively.

The right-hand side shows the 12 months to December 2023, where core inflation of 5.1%, food price inflation of 8.0%, alcohol and tobacco inflation of 12.9%, and a fall in energy prices of 17.3% contributed approximately 4.0%, 0.9%, 0.5% and -1.4% respectively to the weighted average total rate of consumer price inflation of 4.0%

The relative weightings may explain why many people feel that inflation is still running faster than the headline rate. Food prices, up 8.0% in the past 12 months, have increased twice as fast as CPI of 4.0%, while alcohol (up 9.6%) and tobacco (up 16.0%) have gone up by even more. These may have been offset by energy prices coming down by 17.3% over the past 12 months, but this may not be perceived as that beneficial given how energy is still significantly more expensive than it was before the cost-of-living crisis started.

For policymakers, the bigger concern will be the stickiness in core inflation, which remains stubbornly higher than the Bank of England’s target for overall CPI of 2.0%. While the expectation is that both core and headline rates will come down further during the course of 2024, the Bank is likely to remain cautious about declaring victory in the fight against inflation despite worries about the effects of high interest rates on the struggling economy.

This chart was originally published by ICAEW.

ICAEW chart of the week: GDP revisions

This week’s chart takes a look at recent revisions to GDP that have caused some consternation in the world of statistics.

Combination of a column chart horizontally and a step chart vertically. Top section: GDP reported in Blue Book 2022 for 2019, 2020 and 2021: 2019: £2,238bn -5.7% = 2020: £2,110bn +7.6% = 2021: £2,270bn (2020 -5.7% nominal, -11.0% growth, 2021 +7.6% nominal, 7.6% growth) Middle section: GDP revisions 2019: -£4bn, 2020: -£6bn, 2021: +£14bn Bottom section: GDP to be reported in Blue Book 2023 2019: £2,234bn -5.8% = 2020: £2,104bn +8.5% = 2021: £2,284bn (2020 -5.8% nominal, -10.4% growth, 2021 +8.5% nominal, 8.7% growth)

Each year the Office for National Statistics (ONS) publishes the ‘Blue Book’ on the national accounts, its definitive analysis of economic activity over the course of the previous year. This analysis supersedes the preliminary and revised monthly and quarterly estimates issued up until that point, based on extensive analysis by the official statisticians.

The 2023 edition of the Blue Book is scheduled to be published on 31 October 2023. It will be eagerly pored over by economists in and outside government who will be eager to understand how the UK economy performed during 2022, and how this ‘final’ version of the 2022 numbers line up with those preliminary and revised estimates, just as they did last year when looking at GDP for 2021.

However, in the world of statistics numbers are never final. On 1 September 2023, the ONS announced methodological and data improvements to last year’s Blue Book – the numbers for 2021 and earlier years. These prior-period adjustments partly reflected a methodology change in the way the three different methods of calculating GDP (output, income and expenditure) are reconciled, but much more significant were revisions to the data used to calculate some of the key statistics, causing much wailing and gnashing of teeth by some prominent economic commentators as the narrative around the UK’s emergence from the pandemic changed.

As our chart this week illustrates, the revisions to GDP do not at first sight appear to be that significant. GDP for 2019 has been revised down by £4bn from the previously reported £2,238bn to a new official number of £2,234bn; GDP for 2020 is £6bn down from £2,110bn to £2,104bn; and GDP for 2021 has been revised up by £14bn from £2,270bn to £2,284bn. These seem relatively small changes when looking at trillions of pounds of economic activity.

Where the change really has an impact is in looking at the trends, especially after adjusting for inflation. On a nominal basis, a 5.7% nominal decrease in 2020 followed by a 7.6% increase in 2021 has changed to a 5.8% decrease and an 8.5% increase, but in real terms the previously reported economic contraction of 11.0% in 2020 followed by a 7.6% recovery has changed to a smaller contraction of 10.4% followed by a stronger recovery of 8.7%.

Of course, the devil is in the detail and some of the revisions at an industry level have been much more dramatic, with wholesalers and retailers now believed to have grown more strongly than previously believed, while the iron and steel industry changed from growth to contraction.

Many economic commentators have focused on the change in quarterly GDP (not shown in the chart) where the arithmetical changes have been more pronounced. The movement from the fourth quarter of 2019 (previously £568bn, now £566bn) and the fourth quarter for 2021 (previously £593bn, now £597bn) has gone from a 4.4% increase over two years to a 5.5% increase; in real terms from a 1.2% contraction in the economy to growth of 0.7%. Still anaemic, but at least in positive territory.

Despite this small improvement in the economic story portrayed by the GDP statistics, we should not get too carried away. Economic growth remains well below the pre-financial crisis levels and the public finances are in a significantly worse state than they were back in 2008.

In the meantime, the Office for Statistics Regulation has commenced a review into how these small revisions with big implications for our understanding of the economy were not identified at the time.

Further reading 

This chart was originally published by ICAEW.

PACAC submission: statistics in the UK

I recently submitted a response to the House of Commons Public Administration and Constitutional Affairs Committee inquiry: Transforming the UK’s Evidence Base and this has now been published by the inquiry together with other written submissions.

My submission makes one major point about the UK government not comprehensively collecting and utilising financial data that is routinely produced by 10,000 or so public bodies in the UK, as well as other points around the availability of administrative data and the quality of spreadsheet design in communicating many statistics.

Martin-Wheatcroft-PACAC-evidence-submission-2023-08-31Download

ICAEW chart of the week: Language proficiency in England and Wales

This week I take a look at the data on languages contained within the latest release of information from Census 2021 for England and Wales.

Chart with dotted grid (100 x 100) with 10 dots to 0.1%. English or Welsh as main language 91.1% Speaks English very well 3.9% Speaks English well 3.2% Speaks English not well 1.5% Does not speak English 0.3%

The Office for National Statistics (ONS) on 29 November released its latest batch of analysis from the 2021 Census, this time on ethnicity, national identity, language and religion.

Our chart this week delves into this by looking at language proficiency, illustrating how 91.1% (52.6m) of the population in England and Wales speaks English (or Welsh in Wales) as their main language.

A further 7.1% (4.1m) are classified as proficient in English, broken down into 3.9% (2.3m) who speak English very well and 3.2% (1.8m) who speak English well. The remaining 1.8% (1.1m) of the population can be broken down between 1.5% (0.9m) who speak some English and 0.3% (0.2m) who speak no English at all.

The top 10 languages spoken by those for whom English or Welsh was not their main language comprised Polish (612,000 or 1.1%), Romanian (472,000 or 0.8%), Panjabi (291,000 or 0.5%), Urdu (270,000 or 0.5%), Portuguese (225,000 or 0.4%), Spanish (215,000 or 0.4%), Arabic (204,000 or 0.3%), Bengali (199,000 or 0.3%), Gujarati (189,000 or 0.3%) and Italian (160,000 or 0.3%).

Surprisingly, the release does not include data on the proportion of Welsh language speakers in Wales, with a more detailed analysis scheduled to be published by the Welsh Government on 6 December.

The proportion of people who speak English (or Welsh in Wales) as their main language has dropped from 92.3% in the last census in 2011 to 91.1% in 2021, while the proportion of those with another main language who are proficient in English increased from 6.1% in 2011 to 7.1% in 2021. The proportion who do not speak English or who do not speak English at all increased from 1.6% in 2011 to 1.8% in 2021.

While the numbers not able to speak English proficiently remain relatively small as a proportion of the overall population, this still represents more than a million people who are unable to function effectively. Many will be newer arrivals in the process of learning English, but some will be longer-term residents who would benefit from better English language skills.

One question for both local authorities and central government is how much to invest in English language teaching. Finding the money is likely to be difficult at a time of constrained public expenditure budgets, but there may be savings elsewhere such as the cost of interpreters.

This chart was originally published by ICAEW.