Lies, Damn Lies And Statistics In Sweden (of all places).

This post is basically a follow-up to my earlier Just What Is Going On In Sweden? one, and has been stimulated by an article which appeared in Bloomberg earlier in the week, detailing a number of issues which have arisen in conjunction with the Swedish Statistical Office.

The Story So Far

Basically, most of us were, I imagine, pretty shocked to learn at the start of March that Sweden had unexpectedly fallen back into recession in the fourth quarter of last year: we were shocked not only because the news in itself was bad, but also because we had been under the impression that the Swedish economy was recovering nicely. Yet despite all our prior expectations the Swedish statistical office reported that gross domestic product contracted by a seasonally adjusted 0.6 per cent in the fourth quarter of 2009 (when compared with the previous three months), while, in addition, the third-quarter figure was revised to a 0.1 per cent quarterly decline (down from an original 0.2 per cent gain). And two consecutive quarters of contraction meant that, technically speaking, Sweden was well and truly back in recession.

Faulty PMI Readings

But there was more, since if those of us who had been following the performance of the Swedish economy were more astonished than surprised, it was because the Silf Swedbank manufacturing Purchasing Managers Index had been showing not only robust growth for Sweden’s industrial sector, but even suggesting it had been experiencing one of the fastest rates of expansion on the entire planet (and for several consecutive months, see chart below).

Yet far from expanding, Sweden’s manufacturing industry has now been stagnant, and for many months. At least according to data supplied by the Statistics Office to Eurostat (see chart below) it has. Of course, maybe the data the Stats Office has collected about manufacturing output is faulty, but looking at the GDP numbers that seems unlikely, unless of course even the revised GDP numbers need revising…

Yet Another Shoe Drops

And just to show that concerns about the kind of data we have been seeing out of Sweden of late are not unfounded, we have the case of what Cecilia Skingsley, head of macro research Swedbank calls the “shoe adventure”. Basically, and as Bloomberg reports, when the Riksbank raised interest rates in September 2008, 11 days before Lehman Brothers collapsed, Sweden’s central bankers based their decision on inflation figures from the Statistics Office. Unfortunately, later that month four months of inflation data had to be corrected after the Office discovered that a computer inaccurately calculated a 28 percent increase in shoe prices (although the problem, I imagine, lay with the person who entered the data, rather than a malfunctioning computer). As Cecilia Skingsley points out, apart from the impact on central bank monetary policy, “The shoe adventure meant we ended up with a different price base amount, which in turn affected benefit payouts.” In fact Bloomberg estimate that the mistake cost the government something over 600 million kronor ($84 million) in excess benefit payouts.

Statistics Sweden boasts a proud career which dates all the way back to 1686, when a church law became the basis for the Swedish population census. It released 74 publications last year and 371 press releases, cataloging everything from how many moose are shot annually, to the number of Swedes that are named after a Christmas tree ornament. But for all its venerable history, the office (which employs 1400 people) has evidently seen better days, since over 10 percent of 71 statistical reports published in February and March were corrections of earlier data releases.

And it isn’t only the inflation and GDP data which has been causing problems, Figures for local government finances were corrected last month to a deficit of 2.2 billion kronor from a surplus of 2.4 billion kronor. The Swedish government uses these figures to draw up its annual budget.

Another area of contention revolves around central bank rates and home mortgages. The Statistics Office had to correct on Feb. 25 its estimate for the proportion of Swedish households with adjustable-rate mortgages, revising the time series as far back as far as September 2005. The figure for December was adjusted to 58 percent from 48 percent. The revision prompted speculation the Riksbank may have forecast higher-than-necessary interest rates at its February 10 meeting.
All these issues are rather serious, even if some are more important than others, and certainly go to show that statistical issues in Europe extend well beyond those we have seen in the recent highly publicised Greek case. Bloomberg cite many analysts who are rightly angry about the current state of affairs, but let me add my own personal beef about Swedish statistics here: the lamentable state of the SILF Swedbank PMI readings has lead me to suspend Sweden from my monthly global manufacturing report. Quite frankly this sort of faulty measurement only fuels the (largely unjustified) scepticism which tends to surround this kind of qualitative performance measure, yet from what I can see Markit Economics country reports are, by and large, reliable within a reasonable margin of error. Which only makes the Swedish case stand out further, and makes it, at least for my part, incomprehensible that Swedbank haven’t felt the need to make some sort of correction/statement on the topic.

This entry was posted in Economics and demography, Economics: Country briefings, Economics: Currencies by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

10 thoughts on “Lies, Damn Lies And Statistics In Sweden (of all places).

  1. Looks like the people who gave the nobel prize to the commander in chief of the 2 bloodiest wars/occupations in recent history aren’t fit to calculate statistics. Who could have known ?

    Congrats for catching the incoherences in their reports and let’s hope that you’ll be heard : I’d love to have a rational explanation for these communist-like statistics.

  2. I’ve always been wary of govt stats, because they are often not the best stats, but the most useful to the govt. Say, for paying out benefits.

    Raising Interest Rates right before a Flight to Quality is an interesting strategy. Most likely, although the stats are seen to be faulty, they are also automatically generated, and, hence, seen as fair. Obviously, then reality intrudes.

  3. The recent errors at the swedish statistics office (SCB) are unlikely to be caused by political interference, as the government wouldn’t be able to manipulate the data without the press and the opposition finding out. Also the faulty data hasn’t generally been to the government’s advantage, rather it has been somewhat of an embarrassment and has discredited SCB.

    The explanation given for these recurrent miscalculations has been that SCB is having problems with the knowledge transfer as the post-war generation; which makes up a large part of the staff; is retiring and is being replaced by inexperienced younger employees.

  4. Looks like there aren’t any “inexperienced younger employees” in any of the other central banks.

  5. “Looks like the people who gave the nobel prize to the commander in chief of the 2 bloodiest wars/occupations in recent history aren’t fit to calculate statistics. Who could have known ?”

    Attempt at snark…failed. The Nobel Peace Prize, as any fule kno, is awarded by the Norwegians, not the Swedes.

  6. As a Scandinavian, this is of course all very embarrassing. I often brag about the SCB statistics capability when I meet foreigners. Yet the insinuation that this faulty statistic drove the interest rate decision, I find a little far-fetched. It is true that the Riksbank chose to increase the repo rate at the time, but at the same time it also lowered the future repo rate path. The table below is from the September 2008 press release:

    Forecast for the repo rate

    Per cent, quarterly average

    Q2 2008 Q3 2008 Q4 2008 Q3 2009 Q3 2010 Q3 2011
    Repo rate 4.25 4.5 (4.5) 4.7 (4.8) 4.6 (4.9) 4.3 (4.6) 4.3 (4.4)
    The integral under the repo rate may actually be a better measure of how expansive or contracting monetary policy is, and this actually decreased but that’s not discussed in the post (Unfortunately, not all private bank economists are aware of this and instead focus too much on individual point decisions).

    (Note: If the table format doesn’t show up well, you can view it at http://snobbyscandinavian.wordpress.com/ )

  7. @ Alexei McDonald :
    I’m so sorry but I am a traditionalist kind of guy and I don’t recognize the independence of “rebel” Norway. They might be german royalty like any serious royals, but that still isn’t enough.

    @ Snobby Scandinavian :
    Criticizing the author instead of countering the argument is a classic quasi-marxist way of evading the issue. Which still is : why is there such a discrepancy between the ECB manufacturing data and the SCB fantasy numbers ?
    The shoe issue was just a byproduct.

  8. @Olivier:
    Second strike: It is not the SCB that publishes the PMI numbers, it’s a (private) Swedish bank.

    Of course, there is no denying the issues with the statistics of both SCB and Swebank.

  9. Haha I’ve been humbled twice ! I admit my complete defeat 🙂
    Have a good day everyone.

  10. As I understand it the SCB has done an overhaul of all their computer systems and computer programs in the last few years. In the famous shoe case I believe the problem was that the programmer should have added the price increase of shoes to the previous monthly total but instead added the monthly total including the increase for the month at hand to the previous monthly total which caused the inflation in shoes to increase exponentially. This is an unforgivable error. However, the SCB is not being politically manipulated. The reason the government paid out 600 SEK million to much was that the SCB did not even tell the government ahead of the public to ensure that everyone got the information at the same time. And it is good to know that when the SCB gets it wrong it will be random variable and not have any systematic political bias.

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