LONDON • Bank of England (BOE) policymakers are adjusting to an upheaval at the statistics office, at the very point when they need as much clarity as possible to help decide whether to raise interest rates next month.
Britain is this week shaking up the way it reports growth, publishing monthly updates and delaying its usual quarterly figures. The new process comes after most policymakers said they were waiting to see how the economy evolved before raising rates again - a move investors and economists now expect to come next month.
While the new system means that BOE officials will not have an estimate for second-quarter growth when they next meet, Governor Mark Carney said last week that he is "serene" about the change. That may be in part because the BOE has previously questioned the accuracy of Office for National Statistics (ONS) estimates, relying instead on its own analysis.
Investors are currently pricing in about an 80 per cent probability of a rate hike on Aug 2. Asked last week whether the BOE would have enough information to make a decision next month, Mr Carney said "the short answer is yes".
But while the BOE may feel it has a handle on the data, the unpredictability of politics is another factor. Prime Minister Theresa May has been plunged into a major crisis after Brexit Secretary David Davis resigned late on Sunday. Still, markets were largely unperturbed by the latest development, with sterling up 0.4 per cent to US$1.3341.
However, the pound erased its gains after the sudden resignation of pro-Brexit Boris Johnson as British Foreign Secretary.
In a report yesterday, the British Chambers of Commerce highlighted Brexit as a key factor behind sluggish growth in the British economy. The report also flagged tougher trading conditions for consumer-facing industries due to subdued spending.
The ONS will start producing monthly estimates from today, based on data for services, production and construction.
Economists surveyed by Bloomberg expect it to show the economy expanded 0.2 per cent in the three months through May from the previous period.
Crucially for Britain, the monthly data for services - the largest part of the economy - will be brought forward by two weeks.
Quarterly gross domestic product estimates, meanwhile, will be pushed back by 15 days, with the first release on Aug 10, after the BOE's next policy announcement.
That is to improve quality, the ONS says, and could help reduce the possibility of revisions.
Numbers for the current quarter are being closely watched after policymakers and statisticians differed on the economy's strength in the first three months of the year, when storms and snow battered Britain.
Growth was first estimated at 0.1 per cent, a figure the BOE said it expected to be revised higher. It has since been pushed up to 0.2 per cent.
Recent incoming numbers have been stronger, and Mr Carney said last week that he is more confident Britain is rebounding from the sluggish start to the year.