Investment - Articles - Real GDP may be higher than statistics imply says LGIM


Growth and inflation statistics are becoming harder to measure, as a result of the positive effects of new digital services, discount stores and the sharing economy, according to Legal & General Investment Management (LGIM).

 LGIM economist James Carrick looked at how growth is measured and found that real GDP and living standards are probably higher than assumed:
 
 “Advanced economy labour productivity growth remains puzzlingly weak. But we believe statisticians are failing to capture the revolution in distributed networking and cloud computing.”
 
 LGIM estimates that real GDP growth could be underestimated by around 0.5% with six areas contributing to the mismeasurement. Among the most prominent areas of bias are software price mismeasurement, particularly due to the rise of cloud computing and cheap or free digital services.
 
 “Statisticians assume little productivity in software but we think this underestimates ‘real’ growth in the capital stock of software,” James continued. “Take banking for example. We no longer need to go to a physical branch to undertake transactions, but can transfer money using phone apps.
 
 “The ONS only captures the indirect effects from the rise of discounters as supermarkets cut their prices to match. But they don’t capture the direct effect of the households switching to cheaper stores.”
 
 Higher-than-estimated living standards and lower-than-estimated inflation could have knock-on implications for central bank policies.
 
 James commented: “This is not simply a matter of statistics; it could have fundamental macroeconomic and market consequences. For instance central banks may need to re-think monetary policy guidelines if actual inflation is lower than reported and growth is higher.”
  

 Latest Fundamentals booklet - Bean Counter

  

 

  

  

Back to Index


Similar News to this Story

Latest figures shows IHT continuing its unrelenting rise
Just Group and Hargreaves Lansdown comment on HMRC update showing that Inheritance Tax (IHT) receipts totalled £3.06 billion through the first four mo
Capital Gains Tax up 11 percent on last year
The Chancellor has collected £732 million in Capital Gains Tax (CGT) through the first four months of 2025/26, a rise of 11% or £75 million in compari
High earners face £7k extra tax if thresholds freeze to 2030
High earners could face paying more than £7,000 in extra income tax if the Chancellor, in the upcoming Budget, extends the current freeze on tax thres

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.