Covid has played havoc with interpreting economic trends | David Spiegelhalter and Anthony Masters

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Some economic effects of the coronavirus are obvious. Pre-pandemic, the share of retail sales conducted online had taken around eight years to go from 10% to 20%, but then in nine months shot up to 36% in January 2021.

But perhaps more surprising was a recent dramatic headline from Bloomberg: “UK Wage Growth Hits a Record as Vacancies Pass 1 Million”. This was based on estimates from the Office for National Statistics’ monthly wages and salaries survey that average regular pay had increased by 7.4% over the past year. So why should we be cautious in interpreting this huge rise?

As the virus spread, restrictions arose and economic activity slowed. GDP dipped drastically but by June 2021 had recovered to 2% below pre-pandemic levels and was increasing fast, at 1% per month. The headline change for wages compares April-June 2021 with the dip a year before. This lower starting point inevitably leads to larger relative increases – so-called “base…

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