National Institute Economic Review

The mysterious cross-country dispersion in mobile phone price trends

Mobile phones have been central to ICT innovation since the introduction of the smartphone and constant-quality prices are a barometer of their economic impact. Official consumer price indices (CPIs) indicate that impact differs wildly across countries: for the 2008–18 period, average annual rates of mobile phone inflation range from no change to a 25 per cent decline among 12 key countries examined in this paper. Although evidence indicates certain fundamental factors are at play, mis-measurement may lead the spread in rates to be overstated.

Cloud computing, cross-border data flows and new challenges for measurement in economics

When economists talk about ‘measurement’ they tend to refer to metrics that can capture changes in quantity, quality and distribution of goods and services. In this paper we argue that the digital transformation of the economy, particularly the rise of cloud computing as a general-purpose technology, can pose serious challenges to traditional concepts and practices of economic measurement. In the first part we show how quality-adjusted prices of cloud services have been falling rapidly over the past decade, which is currently not captured by the deflators used in official statistics.

Measuring the other half: new measures of intangible investment from the ONS

Only half of investment by firms is in physical capital, such as buildings and machinery. The other half is in intangible assets, such as branding, software and training. This has been true for the past two decades or more in the UK, but only if you step beyond the measures in the National Accounts, which include only some of the recognised intangible assets. This paper surveys ongoing work at the Office for National Statistics to develop measures of investment in intangible assets, using new insights and innovative approaches.

Measuring welfare beyond GDP

Gross Domestic Product (GDP) is often treated as shorthand for national economic well-being, even though it was never intended to be; it is a measure of (some) of the marketable output of the economy. This paper reviews several developments in measuring welfare beyond GDP that were recently presented at the Economic Statistics Centre of Excellence (ESCoE) annual conference in May 2019. The papers discussed fall into three broad areas.

Introduction: Economic Measurement

Innovation in economic measurement is fundamental to a better understanding of how our changing economy works and for whom. The ESCoE Conference on Economic Measurement is a new forum to promote research on economic measurement and increase dialogue between academic economists, national statisticians and statistics users to improve economic measurement. A joint venture between the UK Economic Statistics Centre of Excellence (ESCoE) and the UK Office for National Statistics (ONS), the 2019 conference was hosted at King’s College London, 8–10 May.

Commentary: Monetary and fiscal options in the event of a ‘No-Deal Brexit’

The prospect of leaving the European Union has acted to hamper much economic activity and the formulation of forward-looking plans over the past three years. The Institute has outlined the consequences arising from the various EU Exit scenarios that the UK may face, each of which will leave output lower than would otherwise have been the case (see figure 1 for our modelled exitpaths).

World overview: Forecast summary

  • Recent trends in global industrial production and trade show activity stalling since late last year. The pace of service sector activity has remained steadier.
  • Tariff increases and trade disputes have contributed to the weakness in production and trade and have added uncertainty to the global economic outlook.
  • In response to weaker production activity and continued low inflation, central banks in many economies have either loosened monetary policy or positioned themselves to do so, which has been reflected in financial markets.

Prospects for the UK economy: Forecast Summary

  • Economic growth has stalled and there is around a one-in-four chance that the economy is already in a technical recession.
  • The outlook beyond October, when the United Kingdom is due to leave the European Union, is very murky indeed with the possibility of a severe downturn in the event of a disorderly no-deal Brexit.
  • On the assumption that a no-deal Brexit is avoided, the economy is forecast to grow at around 1 per cent in 2019 and 2020 as uncertainty continues to hold back investment and productivity growth remains weak.

World Overview

Economic activity showed a marked slowing in growth in several countries during the second half of last year. The key issue for the forecast concerns to what extent this slowdown may presage a more widespread and deeper slowing in economic growth. Our central view continues to be that global economic growth will be weaker this year than last but that the pace of growth will moderate, not plunge.

Prospects for the UK Economy

The main development since our last forecast is that the United Kingdom’s exit from the European Union did not take place on 29 March as had been planned. Instead, the exit date has been pushed back to 31 October 2019, with the possibility of leaving earlier if some way around the existing parliamentary impasse can be found before then.

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