The Impact of GDP Data Revisions on Identifying and Predicting UK Recessions (ESCoE DP 2020-12)

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The Impact of GDP Data Revisions on Identifying and Predicting UK Recessions (ESCoE DP 2020-12)

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Statistical offices revise GDP values to improve earlier GDP estimates. Revisions are led by updates on data availability and methodological changes, including those required for international comparability. In this paper, we apply the Bry-Boschan Quarterly (BBQ) algorithm for dating turning points on a set of UK real GDP data vintages to assess the impact of GDP data revisions on dating UK business cycles. A peak identified in 2011Q3 suggesting a recession in late 2011/early 2012 vanishes as data revisions are incorporated to previous estimates of real GDP. We also evaluate the impact of turning point revisions on the choice of indicators to provide accurate predictions of recession probabilities. In real-time, the GFK consumer confidence index is the best, but alternative indicators such as CBI retail orders and construction indices are more accurate if recession periods are identified with the latest vintage of real GDP.

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