Numbers game that’s a mystery to many


What is in a number? After every quarter the Office for National Statistics publishes two estimates and then a final number for how the UK’s GDP either expanded or contracted over that period. In the days before the first estimate, analysts queue up to give their guesses, and in the immediate aftermath of the first published estimate, markets often rise and fall depending on how far off the first estimate was from the consensus opinion.

Yet despite this constant focus on the number, this week’s Perspective feature by Daniel Ben-Ami questions just how much people understand GDP as a measure of the economy. In the first of two articles, Ben-Ami goes back to basics, setting out what exactly GDP measures and what it leaves out.

This is particularly timely given the wide-reaching revisions to GDP which have recently taken place on the other side of the pond. Effective from 31 July, US GDP is being recalculated by the Bureau of Economic Analysis all the way back to 1929 to
give greater weight to intellectual property such as books, films, music and television shows.

As a result of the exercise, although there will be no real increase in the level of output, US GDP will instantly rise about 3 per cent in an effective $300bn boost to the economy. 

The UK and other developed economies are set to follow suit, with the ONS preparing to take intellectual property into account for GDP in the next couple of years. 

This is likely to result in a number of similar revisions to those in the US, at which stage expect the experts to wade in and tell us what it all means.

Meanwhile, this week’s Trends feature by Julian Fosh, co-manager of the Liontrust Special Situations fund, takes a closer look at the investment case for those so-called intangible assets, around which the fund’s investment process is built.

In other numbers, it seems the recent stockmarket rally is persuading retail investors to put their money to work, as funds benefit from their highest quarterly net retail sales figures in two years, according to the most recent Pridham report. Net retail sales hit £5.2bn in the quarter, according to the report, with equity income funds faring particularly well.