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Wednesday, 3 June 2009

Poor Laura, how DO you understand economics, reporting of Journalists

My daughter is taking an exam in Economics today, "DAD how DO I understand this nonsense text book"?

I quoted the old chestnut if you laid all the world's economists end to end you still wouldn't get a decision or, if you put 24 economists in a room, to discuss a problem you will get 36 answers!

So after all that banter what's the point of today's blog?

RECORD JUMP FOR HOUSING CONSTRUCTION

A headline on Telegraph online today, so what would you make of that headline? There has been a huge jump in new building starts? No. There has been a huge jump in construction spending on houses. NO! The end of the construction recession as growth rockets? NO NO NO

This stupid headline is to do with the "purchasing managers index". This is a report on the expectation of purchasing managers in industry, construction and services. The headline is actually completely misleading because the data showed continued decline in the house construction sector!

When reporting these indices they use a figure of 50, anything below 50 signals decline in the sector, any number above 50 shows growth.

So how come a figure of 48.5 equates to a RECORD JUMP OF HOUSING CONSTRUCTION, am I missing something?

Or is this nonsense just journalist looking for sensational headlines? Not just that really because some eminent economists jumped to quickly say.....

"These data are a further sign that the UK economy is past the worst of the recession"!!!

Or to put it another way if your business' sales were falling say 3% which these numbers point to, would you report to your board/ investors or bank that your business had had a RECORD JUMP in sales?

Semantics? Downwright nonsense? You decide.

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