If something sounds too good – or indeed too bad – to be true, it probably isn’t. That applies to statistics, even when they come from a source as ostensibly reliable as the former governor of the Bank of England. Unfortunately, though predictably, that wasn’t the reaction to Mark Carney’s recent claim that “in 2016 the British economy was 90 per cent the size of Germany’s. Now it is less than 70 per cent.” Rather, commentators seized on the claim as evidence of the disastrous economic consequences of Brexit, despite the fact it fails the most basic smell test. The idea that we have become more than 20 per cent poorer compared with Germany in six years just doesn’t make sense.
It’s not clear exactly where Carney’s numbers come from. His subsequent Twitter explanation appears to compare nominal growth (without adjusting for inflation) in Germany with real, inflation-adjusted growth in the UK – the sort of spreadsheet error all of us economists make occasionally. But the key point is that his view that the UK has hugely underperformed against Germany (and the EU and US too) is based on comparing the size of economies measured using market exchange rates; that is, translating the size of the UK economy into dollars or euros according to the exchange rate at the time.
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