50bps of Grey
An ONS survey supports our view that real GDP is underestimated by around 50bp as people refuse to declare 'grey' / 'sharing' economy earnings, such as sub-letting accommodation.
Four out of five households admit to paying cash-in-hand to tradesman and a recent survey by the ONS suggests people involved in the ‘sharing’ economy don’t like reporting their earnings either.
The ONS was investigating the size and shape of the sharing economy. When it asked people about earnings generated from the sharing economy:
This supports our (and Professor Sir Charlie Bean’s) analysis (as detailed in our latest Fundamentals piece Bean Counter) that economic growth is underreported by around 50-75bp and that we should put more emphasis on the strong jobs growth. We think productivity is holding up better than feared, which is good news for equities as productivity is the long-run driver of company earnings.