Oops…. they got it wrong

It is common practice for governments to issue bad news on a Friday so that it can be quietly buried as journalists head off for the weekend. On the face of it, the fact that for many countries in Europe the last recession was not as bad as we were made to believe looks like good news – unless you reflect on the fact that it leaves egg on the face of EU politicians and statisticians and will anger a lot of people who made investment decisions and took other financial risks on the basis of false information.

According to the European Commission’s statistical agency Eurostat new ways to capitalize research and development and defence spending plus various “statistical improvements” have led to some extensive revisions in GDP figures for the period from 1997 to 2013. So much so that the collapse of the economies of Cyprus and Netherlands in 2010 now appears to have been severely overblown. The new figures raise the 2010 GDP figures by 9.5% for Cyprus and 7.6% for the Netherlands.

Other countries affected by these changes are Sweden (+5.5%), Finland (+4.7%) and the Czech Republic (+4.3%). In all other EU countries except Latvia the changes had a positive effect upon GDP.

Of course,  we have always known that GDP figures have been vulnerable to such substantial revisions. That is why it is so dangerous to look at current statistics and draw too many conclusions from them. This is, however, a significant embarrassment for the European Commission.

The Federation is currently compiling new figures to create improved estimates for the global economy, prices and remuneration. These will make it much easier to assess the overall movement of economic cycles as they occur.

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