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Lies, damned lies, and statistics

d=”standfirst”>Benjamin Disraeli counselled against relying too closely on isolated data, saying: “There are three kinds of lies: lies, damned lies, and statistics." 

And so conflicting are the latest fugures on the British economy that the former Prime Minister’s words of warning hold as good today as they did 120 years ago.

Lenders report that up to a fifth of all mortgage-holders are in negative equity due to falling property prices but the Office of National Statistics (ONS) says that house prices rose by 0.1% in May while Nationwide reckons they rose by 2.6% in the past three months, despite widespread predictions that they have further to fall. Unemployment is at its highest rate for 13 years (and rising sharply), but the CBI says that sales in July fell among the smallest proportion of retailers for more than a year, with some sectors reporting growth. Even so, the CBI’s survey shows that sales volumes in 47% of stores were below the 2008 level, despite the negative rate of inflation boosting spending power. 
Back to the ONS, whose latest gross domestic product figures suggest that takings in hotels and restaurants suffered a slower pace of decline in the second quarter of this year than in the first three months, perhaps in part because consumers regularly pare their spending in this sector between Christmas and Easter. 
Total business in bars, the GDP figures suggest, rose for the first time in a year in May and the British Beer and Pub Association says that the rate of decline in in-pub beer sales in the second quarter slowed to minus 4.5% compared with a year earlier and the minus 9.9% suffered in the final three months of 2008. Yet the same trade body says that the rate of pub closures is running at a record 50 a week. The much heralded (and longed for) “barbecue” summer has gone AWOL, so the third quarter beer sales and pub closure figures will make interesting reading. 
It is a truism that no great emphasis should be placed on a single set of figures; it’s the overall picture that counts. And as far as consumer spending is concerned, no concerted upsurge is in sight. Looking at the big picture, Capital Economics, the respected independent consultancy, calculates that the recession is easing (just) but that the expected quickening pace of unemployment means that the recent marginal improvement in consumer spending is unlikely to last. Indeed, it predicts that consumer spending will fall further next year. Within that, however, Capital Economics says that the slowdown in spending on alcohol may ease as people turn increasingly to staying at home rather than going out for entertainment. More gloomily, however, spending in pubs and restaurants will remain heavily cyclical. 
So the message is that trading will remain very difficult for some time to come. Which reflects the mood of the stock market following the 11 consecutive days of increase in the FTSE100 index that ended on Tuesday. It was summed up by the pundit Justin Urquhart Stewart. Asked if the rises were evidence of a sustained stock market recovery beginning, he said: “This market has every opportunity of continuing its volatility.” (Translation: “Who knows?”).
Finance on Friday, 31.07.09

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