Strong case for more accuracy, less speed

FS Adam Lewis 160 byline

Given the current state of the global economy it is no surprise that in recent years every man and their dog has seemingly become an expert on its coming and goings. It is hardly surprising given the huge increase in news coverage, both on TV and in print, that macroeconomics has moved from middle pages to front page and from last slot on the TV news to first.

The case is especially true when the Office for National Statistics releases its quarterly data on UK GDP growth. The news two weeks ago that the UK had come out of recession in the third quarter, after three quarters of contraction, was discussed up and down the land. What many sadly do not realise was the 1% growth number was first estimate and judging by history is extremely likely to be revised.

Indeed according to Cazenove’s chief investment officer Richard Jeffrey (see news page 7), over the past 20 years, over one third of the ONS’ first estimates of year-on-year growth have later been revised by over 1 per cent . The problem is, by the time of the revision, the damage done to sentiment has already been done.

The question thus is should the ONS hold off on the first estimate? As Jeffrey asks, if speed equals inaccuracy is there a case for speed?

Meanwhile away from the fanfare headlines last week of equity fund sales surpassing bond fund sales for the first time in 12 months, the IMA’s fund sales stats for September reveal for some interesting behaviour among fund buyers.

Absolute Return fund sales topped the charts, attracting total net sales of £193.4m, while despite all the talk of investors being ‘risk off; global emerging market funds came in third after taking £137.8m for the month.

However while retail investors seem to be feeling the love for Gems, the same is not true for China/Greater China, after the sector saw net outflows of £18.3m, marking it as the second least popular sector behind UK All Companies which saw redemptions of £205.5m.

Meanwhile despite no sign of a resolution to the eurozone crisis, investors pumped £93m into the sector (ex UK) in September, considerably more than the North America sector which saw £39m of inflows. Risk off? Maybe not.