Concerns are mounting over the reliability of economic data in the US and UK, impacting policy decisions and investor confidence. Issues include declining survey response rates, budget cuts, and staffing shortages at key statistical agencies. This deterioration complicates accurate economic assessment, potentially leading to misguided policies and increased market volatility.
The Erosion of Data Integrity
The quality of economic data, particularly from the US Bureau of Labor Statistics (BLS) and the UK’s Office for National Statistics (ONS), is under scrutiny. Declining response rates to surveys, a critical component of data collection, are a significant factor. For instance, BLS household and establishment survey response rates have been consistently trending downwards. This raises questions about the robustness and accuracy of reported figures, even if the full impact on accuracy remains unclear.
Factors Contributing to Data Deterioration
Several factors are exacerbating the data quality issue:
- Budget Cuts and Staffing Shortages: Agencies like the BLS have faced budget reductions and staffing challenges, leading to reduced data availability and collection in certain areas. For example, the BLS suspended CPI data collection in some cities due to staffing issues.
- Increased Imputations: With less direct data, statistical agencies are relying more on imputations (estimated values). In the US, the percentage of imputed CPI values has reportedly tripled from the average, meaning a significant portion of inflation data is based on guesses.
- Delayed Reporting: In some economies, like Nigeria, significant delays in GDP reporting (over 100 days for Q1 2025) undermine economic credibility and hinder timely analysis.
- Discontinued Data Series: The BLS has discontinued the calculation and publishing of wholesale pricing data for hundreds of products in the producer price index, further limiting comprehensive economic insights.
Key Takeaways
- Impact on Policy and Investment: Deteriorating data quality makes it harder for policymakers, including the Federal Reserve, to accurately assess economic health and make informed decisions. For investors, it means that while reported company earnings remain reliable, the broader economic context for those earnings becomes less clear.
- Call for Investment: Economists and international bodies like the IMF are urging increased investment in statistical systems to restore data integrity. They emphasize that reliable data is crucial for effective economic oversight and policy calibration.
- Holistic Analysis: Investors are advised to consider a confluence of data holistically and over time, rather than relying on single metrics, as broad trends matter more than increasingly elusive data precision.
Responses and Outlook
Federal Reserve Chair Jerome Powell has voiced concerns about the direction of data quality, stating it could make it more difficult for the private sector and government to understand the economy. The ONS in the UK has secured additional funding to address similar issues and restore confidence in its statistics. While some officials maintain confidence in their ability to track economic trends despite challenges, the consensus among many economists is that the statistical system is under acute stress, necessitating urgent attention and resources.
Sources
- When economic data quality deteriorates: Two thoughts for investors, Yahoo Finance.
- Nigeria’s GDP Reporting Crisis: When Data Delays Undermine Economic Credibility, Businessday NG.
- IMF sees Nigeria’s data gaps as obstacles to economic oversight, Businessday NG.
- Fed Chair Jerome Powell Raises Concerns Over Economic Data Quality, Business Insider.
- Why some fear government data on the US economy is losing integrity, The Washington Post.