Dear Editor,
I follow up to contributor M Maxwell’s latest on this topic, his long missive carried in your Saturday edition, February 6. Recap: he first questioned the eventual growth rate for year 2015 et al, carried in your Monday, February 1 edition, and I responded to some glaring misinterpretations, ridiculous calculations in my response, carried in your Thursday edition of February 4. And now there is another season of misinterpretations and embarrassing miscalculations from the contributor in his latest, captioned ‘There is doubt about the whole year GDP rate’.
Remember one of the first things that I had to call out the contributor on was his obvious distress with interpreting basic indicators, and worse with basic calculation of numbers (and I am talking here about simple arithmetic, not statistics). If the contributor has a real problem with these basics and simple calculations, no wonder that his conclusions are flawed.
I recap that the first thing that I had to call out Mr Maxwell on was that you cannot ‘subtract’ the first half growth from the end of year growth to obtain the implicit second-half growth and then average the two halves to obtain a whole year growth. I further had to enlighten him that you cannot take the half-year annualized inflation rate and ‘subtract’ it from the end of year inflation rate to obtain the inflation rate for the second half of the year.
I was even prepared to attribute those errors to a slip of pen in the construct of his lengthy letter. But it cannot be so because the contributor has now repeated these errors of interpretation and simple calculation with more conviction and belief as he gives his own analyses of the numbers.
Last Saturday Mr Maxwell now essentially admits that his “subtraction of the half year inflation rate from the end of year inflation rate to derive the second half inflation rate could never stand scrutiny,” and that “Mr Benjamin did confirm that deflation is measured by looking at the slide in the CPI. While he may not have cause to worry because the CPI did not slide 1.6% between June to December, 2015, as Chief Statistician he certainly should have cause to worry because the CPI did slide 2.07% year-over-year from December 2014 to December 2015.”
He continued: “The CPI declined 0.22% from H1 2014 to H1 2015” and concludes “Incidentally this was correctly confirmed in the Finance Minister’s Budget Speech”. Given his now exposed poor track record in the use of figures and simple calculations, I do not believe that the Bureau’s staff, the staff at the Ministry of Finance or the Minister of Finance himself needs Mr Maxwell’s blessing or corroboration that what is included in the budget or pronounced by the Minister in respect of the calculation of core indicators is wrong or right.
Mr Maxwell could have stopped there, but proceeded to monumentally embarrass himself by stating: (pronouncing on the measurement of the inflation rate) –
“Where it gets more troubling is that the Finance Minister claimed at paragraph 3:14 of that speech [the budget speech] that deflation was 1.8% at the end of December 2015” (ostensibly compared to December 2014). Well there is nothing ostensible for Mr Maxwell to contemplate about, because it is measured based on the Indexes at December 2014 and December, 2015, respectively.
Mr Maxwell continues the self-embarassment: “This is disputed [the Minister’s pronouncement of a 1.8% deflation] by Mr Benjamin’s own figures which put the CPI at the end of December 2014 at 113.94 versus 111.87 at the end of December 2015. That is deflation of 2.07% and not at the 1.8% claimed by the Minister”.
Mr Maxwell of course has subtracted the value of the index at December 2015 from the value of the index at December 2014 (-2.07) and having then placed a percentage sign after the result has now decreed from his more learned perch that the change is equivalent to a 2.07% decline or deflation and not the -1.8% deflation announced by the Minister. Well, for his education, a deflation of 1.8% it is; his 2.07% is ridiculous. Let me emphasise: By his new methodology, if there are two values of an identical variable, the first value being 15 in the first period and the second value being 10 in the second period then according to him the percentage decline between the two values is 10 minus 15 which is equal to minus 5, and he then places a percentage sign behind it giving a result of -5%.
I cannot understand this seeming obsession with subtraction of everything in sight, and making his analyses on these kinds of calculations.
To recap:
The contributor first subtracted the first half growth from the end-of-year growth to obtain an implied second half growth before finding the average of the two halves.
Secondly, Mr Maxwell again subtracted the annualized inflation rate at the end of the half year from the inflation rate at the end of the full year to arrive at the inflation rate for the second half of the year.
Thirdly, in his latest letter he has now proceeded to subtract the Consumer Price Index at December 2014 from the December 2015 Index and pronounce that such subtraction gives the percentage change. Not only are the calculations shameful, the conclusions are presumptuous, saying that my CPI figures do not support the Minister’s pronouncement of -1.8% but his of the famous -2.07%.
I wish I could stop here but Mr Maxwell does not stop, and only compounds his situation. He continues: “Mr Benjamin refers to imports of consumer goods increasing by a quarter in 2015 as … ‘a proxy of consumers’ willingness to spend.’ The Finance Minister reported at paragraph 3.8 a significant 17.7% decline in merchandise imports. How do we solve this telling contradiction between the Finance Minister and his Chief Statistician?”
What contradiction, Mr Maxwell? I have quickly learnt to independently check every source quoted by him because of his gift of misinterpreting and of course miscalculating. And so it is that on checking paragraph 3.8, the Minister did say, “Mr Speaker, there was an overall improvement in the deficit of the Balance-of-Payments, which contracted by 7.5 per cent to US 107.7 M. This was principally a result of the reduction in the merchandise trade deficit, occasioned by a 17.7% decline in imports which was due to lower oil prices”.
We now check this statement by reference to the appendices to the budget speech and we refer to the Table ‘Balance of Payments Analytical Summary’ where imports for the two years of interest are shown as follows:
Year 2014 Year 2015
BOP Deficit BOP Deficit
-US 385.18 -US 144.20
Merchandise Imports
1791.27 1474.898 US Mn.
Calculation of Year 2015 over Year 2014 gives a value of 0.823 which is indeed equivalent to a -17.7 % decline, so Mr Maxwell this time has quoted the Minister correctly and the Minister’s pronouncement of a -17.7 % decline in imports is also totally correct.
The Chief Statistician reported that imports of consumer goods incrementally increased in every consecutive quarter of 2015 and Mr Maxwell now speaks of and requires a solution for this telling contradiction (in his eyes) between the Minister and his Chief Statistician. As I said earlier, what contradiction?
The import figures quoted from the Balance of Payments table above and used to verify the -17.7% decline refer to total merchandise imports (some refer to these as the visible imports) for the year. But merchandise (visible) imports are grouped in four major categories (United Nations Economic Classification of Imports) and these categories are:
- Consumer Goods. 2. Intermediate Goods 3. Capital Goods 4. Miscellaneous Goods.
I spoke of the first category (Consumer Goods) imports which increased incrementally starting from the first quarter level and thereafter continuously increasing during every remaining quarter of 2015. The greater reduction in the value of imports obviously came from the intermediate category, particularly due to the steep drop in the acquisition value of fuel imports as well as the Capital category (the highest-valued) goods. Consumer goods imports started at US$92 M, increased to US$96 M in the second quarter, then to US$105 M in the 3rd quarter and finally US$110 M in the 4th quarter.
The point made was that there was no debate that there was a serious slowdown in the economy during the first half. Mr Maxwell contended that this slowdown continued throughout the second half and as shown above this was partially based on his erroneous conclusions and calculations about the rate of deflation and consumer spending during the second half, etc. I reiterate my contention about the indicator ‘imports of consumer goods’ being a proxy of ‘consumers’ willingness to spend’. The business community does not import for purposes of carrying high levels of inventories, but to effect a rapid turnover in sales. The exceptions would be when there is expectation of a devaluation in local currency or rising inflation in source countries, for example.
The business community must have some indication of the arrest of consumer lack of spending to continue to import more consumer goods (the immediate target of household expenditures) in every successive quarter of 2015. To put things in a little better perspective, imports of consumer goods in the final quarter of 2014 were at a level of US$118 M, but declined to US$92 M in the first quarter of 2015, a differential spread of –US$26 M between 4th quarter 2014 and first quarter 2015. As a result of the continuous increase in consumer goods imports throughout the year by end 2015 the differential between final quarter 2015 imports and final quarter 2014 imports had been narrowed to –US$8 M, a substantial reduction from the –US$26 M with which the first quarter commenced.
Though time consuming, I had to take time to highlight Mr Maxwell’s monumental flaws in both interpretation, conclusions and the worst, simple calculations. I can better understand his difficulty to conceptualise the level of growth reported.
Because I detect an attitude that borders on arrogance when Mr Maxwell asks, “by what measure are transportation, storage, information, etc, heavier weighted-sectors?” (Omitted were of course gold and construction, wholesale and retail.) I do not know if Mr Maxwell was aware of the comprehensive rebasing exercise carried out over a two-year period to rebase our economy in 2006-7, with direct inputs from staff of the US Bureau of the Census and the IMF’s Caribbean Technical Assistance Centre (CARTAC) working directly with the bureau’s staff, where it was clearly determined that sugar, rice, other agriculture, bauxite were no longer the sectors that had the greatest impact on the magnitude of the economy’s growth. Agriculture is one of our best national endowments for expansion, employment, etc, but it cannot at this time impact on overall growth and the level of growth the way that gold, diamonds, construction, transportation, trade sectors, etc, will.
I clearly recall sometime circa 2010 the rebasing results and the new pattern of the economy being publicly presented at a forum at Pegasus to the widest possible cross-section of stakeholders and interested persons and academia. Joining the bureau at that important forum were then Finance Minister Ashni Singh, the Statistical Institute of Jamaica, and the IMF’s Caribbean Technical Assistance Centre. I still vividly recall the contributions that were made by the then opposition chief spokesman on the economy, the late Mr Winston Murray, in what all concluded was a most high-quality exercise and which guides the GDP compilation to date.
However, as Mr Maxwell said, Mr Benjamin left out the real heavyweight sectors, the agriculture and commodities sectors. And there lies Mr Maxwell’s dilemma: he is in a time warp and has not adjusted to the reality that Guyana’s economy has long since shifted from the sugar, rice, bauxite, other agriculture dependency for economic growth and prosperity. The harsh reality is that the economy has grown despite the comparative weakening of these sectors of former dominance. But maybe he has done his own rebasing and knows otherwise – that agriculture and commodities are the dominant engines of growth.
Editor, I consider this matter closed as there seems no likelihood of convincing Mr Maxwell. The contributor’s exhibited flaws may contribute to this. It may be that his enlightenment may come from elsewhere among your other contributors on the economy.
Yours faithfully,
Lennox Benjamin