Yahoo Finance Brits have poor grasp of economics and 'distrust official data'
Brits have a “limited grasp of economic concepts, and distrust official data” such as the unemployment rate or the deficit, a new study has found.
People are more likely to see economics through the lens of their personal experience rather than official economics data, according to the report by the Economic Statistics Centre of Excellence (ESCE), a think tank funded by the Office for National Statistics (ONS).
Brits feel “smacked in the face by the economy” and see it as a threat “constantly hanging over us,” the survey of 1,665 people found. This has led to a distrust of data, and belief that politicians “twist” figures to reflect their own agendas.
The report found that distrust was partly caused by a general misunderstanding that economics data is collected and measured by the government, with the government manipulating underlying data to suit their own ideas. UK economics data is actually collected by the ONS, an independent body.
Brits were disillusioned about the economy, seeing it as an “external negative force outside their control.” The report said that communication of data and concepts could be improved as groups such as politicians and the media communicate economics concepts in a way that many people find confusing, according to the report.
READ MORE: UK pub operator Fuller, Smith & Turner cuts 20% of staff
Distrust and misunderstanding of economics data supports widely held views such as the idea that unemployment and inflation rates are higher than those reported on the news, the ESCE found.
This is partly due to misunderstanding of what these rates mean, the think tank said. The unemployment rate is about people who don't have a job, but who have been actively looking for work, but people tend to think this data is about everyone who doesn't have a job, which is a much higher percentage of the population.
Confusion about Gross Domestic Product (GDP) is rife, with less than half of people able to correctly identify GDP as being the value of goods and services produced in a country, the report found.
Respondents tended to confuse GDP with the value of exports. Net exports are a part of GDP, but household spending is the biggest part, along with investment and government spending.
Brits also got confused about acronyms, mixing up GDP with GBP (pound sterling) and even GDPR (data privacy law).
READ MORE: UK car output falls 18.2% in October
Brits had a better understanding of inflation, especially related to price growth, but often had a simplistic view of how inflation is calculated, and of how data is collected, according to the ESCE.
The report highlighted factors including education level and socio-economic group as impacting how much people trusted and understood economics data.
The ONS said: “This report raises some interesting questions and highlights the challenges all communicators face when explaining complex economic concepts.”
WATCH: What is inflation and why is it important?
