Statistics, statistics

The Tre Professore has told us this morning that very few people understand UK economic statistics. Apparently, because the ONS site isn’t very good.

Hmm, it could be because some people just don’t understand economic statistics:

What is happening is aberrational. Households are saving almost 30% of their incomes.

Of course, that helps explain an economic downturn. This translates into a lack of demand in the economy.

No, no it doesn’t. The numbers being quoted are up to the end of June. We’re in November now, they are not current numbers. Further, the Telegraph can tell us what is actually going on:

The Office for National Statistics’ more detailed breakdown of the April-June quarter – the worst decline on record – showed average household savings jumping to a record high of 29.1pc after the shuttering of all but non-essential shops.

Household spending over the quarter sank by a record £80.5bn

Yes, and?

The UK economy is 21.8pc smaller than it was at the end of last year.

But thanks to the effect of the furlough scheme, as well as support for self employed workers, employee compensation “only” fell 2.2pc over the quarter.

People couldn’t go out and spend during lockdown. But they still had incomes. If you can;t spend then you must save. QED.

9 thoughts on “Statistics, statistics”

  1. Bloke in North Dorset

    Isn’t he the nulle professore now?

    (Apologies to Italian speakers if I’ve bodged that translation, but I’m sure you’ll get the meaning.)

  2. Grandad, these days people can pick up their phones, browse, choose, order & pay for goods online – all without leaving home & all thanks to the inventor of the internets – Al Gore.

  3. As such, as lack of supply in the economy. Due to excessive regulation. The cure for this is of course more regulation, which we should keep adding to until we get the right type of socialism regulations.

  4. If you can’t spend, it must be taken by the State.

    Anyway, you would think that an alleged ‘Green’ forever rending his toga over ‘consumption’ would welcome a reduction and the money saved instead. But, no.

  5. How odd that he hasn’t noticed the lack of (or massive restrictions over) supply of pubs, restaurants, theatres, concerts, museums, plane or other travel, hotels, gymnasia, shops…… This guy cannot even put 2 and 2 together let alone come up with an answer. It’s almost as if he has no idea what has happened during the months of lockdown and the temporary partial lifting of the rules. Did his local Greggs break the rules and keep him porked up for the duration?

  6. “People couldn’t go out and spend during lockdown. But they still had incomes. If you can;t spend then you must save. QED.”

    Saving equals investment (S = I). It does so at every instant in time and to the penny. So how do we get this:

    “Households are saving almost 30% of their incomes.”

    Did investment suddenly jump to 30% of the economy? Or was it something else? Like maybe government spending.

    So what happens if the government gives you $100 and you save it. Well, then saving is $100. What happens if you spend it. Saving is still $100 because that $100 is in someone else’s hands (assuming no taxation). Spending does not reduce saving, it just moves it around. What removes saving is taxation. Here is the sectoral balance equation, from the perspective of the government:

    (G – T) = (S – I) + (M – X)

    Every dollar of government spending must end up as a dollar of saving in the non-government sector. That’s the stuff on the right-hand side of the equation. It is that government spending that allows the domestic private sector to reach such a high level of saving, far in excess of investment, i.e., S > I. Only taxation will bring that saving back down but that happens over time.

    So, no. People are spending but the injections of government spending are higher than the leakages from taxation. I would assume that with businesses having low profits or even running at a loss, there would be very little taxation going on, which is why saving is building up.

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