Two Days ago in the House of Commons the Chancellor of the Exchequer stood up and blethered on about how bad it was going to be … for you and me!

I read the papers and looked at one or two videos from the Financial Times and other places. The FT pointed me at www.ft.com/autumnstatement and that contains links to some excellent materials. What I wanted to do was to find some data and see what I could make of it in Excel.

The data came in PDF files and there is a LOT of it. What follows, then, relates to just one table from one file. Firstly the data and then some things that I did to it using Excel:

PastedGraphic-1.pdf

I used Excel for mac: 2011 for this analysis: for this reason you can see the sparklines. Sparklines, remember, are one cell charts or graphs that can be presented as line sparklines, column sparklines or win/loss sparklines. I used column sparklines above and highlighted negative values.

One of the things I was really looking for was the hockey stick effect of economic and financial forecasting: I found it! I think you will understand what the hockey stick effect means when you see the very first of the 11 charts I prepared from the above table:

PastedGraphic-2.pdf

Get it? The hockey stick effect I mean.

How about this one?

PastedGraphic-3.pdf

Got it yet? The hockey stick effect I mean.

OK, take a look at this:

PastedGraphic-4.pdf

I think you’ve got it now: the hockey stick effect is that when we are creating a forecast, we often say that the immediate future will be worse than today but after a while things are bound to look up and then things will get better and better.

Eight out of the eleven charts I produced from the UK Economy demonstrate the hockey stick effect: plot them all to see what the other three look like!

In addition to charts I programmed a correlation matrix, to take a look at the inter relationships that the UK Government has built into its forecasts. Take a look:

PastedGraphic-6.pdf

I hope you can read that table: I have used ordinary manual formatting for that and for the matrix itself I have used conditional formatting: greater than, lower than, between.

In terms of correlations, changes in inventories seems to relate to nothing … why would that be?
Domestic Demand correlates very well with most things … should this be the case?
Exports of Goods and Services is right in the middle in that it correlates only marginally with most of the other variables … is this a surprise?

Since I am using Excel for mac 2011 you need to know that it does not have the Data Analysis ToolPak Add-In available to it so I had to programme the correlation matrix cell by cell like this:

=CORREL($B$13:$H$13,$B14:$H14)

In terms of the world economy, here is a chart based on the first part of the table of data shown at the start of this post:

PastedGraphic-7.pdf

There is not that much evidence of the hockey stick effect here: well, not that we can see. Take a closer look at the sparklines and see what you can see. I am not saying the hockey stick effect is there but it’s a good idea to take a look at each variable alone rather than just relying on my composite chart!

There you are! I hope you find this whistle stop review of just one or two aspects of the data tables and so on that the UK Government has used to base its economy policies on … and for the sale of hockey sticks maybe!

The source of data on which this post has been based is: http://media.ft.com/cms/b6e1e1ec-1a91-11e1-ae4e-00144feabdc0.pdf

Duncan Williamson

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