Brussels, Jan. 20 (Bloomberg) -- Improved economic data for the euro region will enable European Central Bank policy makers to react faster to faltering growth, board member Eugenio Domingo Solans said. The European Union's statistics office plans to publish as early as February a ``flash estimate'' of gross domestic product in the 12-nation euro region, providing information on growth rates more than 20 days sooner than currently available. ``To have a flash indicator concerning GDP in order to update our position in the business cycle would be important,'' Solans, who is in charge of statistics at the ECB, said in an interview. ``This could of course be helpful to better assess the economic situation and therefore to take better policy decisions.''
ECB policy makers were criticized last year for being slow to lower borrowing costs to support the euro-region's economy, which the European Commission forecasts may contract this quarter. The central bank lowered its main rate by a half-point to 2.75 percent in December, the first reduction in 13 months. ``The ECB will be under particular scrutiny given the present growth gap between Europe and the U.S., which is fairly large,'' said Holger Schmieding, co-head of European economics at Bank of America Corp. in London and a former adviser to the International Monetary Fund. In the third quarter, the U.S. economy expanded at a 4 percent annual rate compared with around 1.2 percent in the euro region. The U.S. was quicker to report, with an initial estimate of 3.1 percent on Oct. 31, compared with Dec. 4 when the EU first published its growth figures. The EU numbers weren't revised.
`Trade-off'
``There is a trade-off between timeliness and quality of statistics,'' Solans said. While he wants faster data, he doesn't want to see ``very big'' revisions. Eurostat, the EU statistics agency, hasn't decided when to release the new quarterly GDP estimate for the euro-12 economy. The choice is mid-February for growth in the fourth quarter -- against Jan. 30 in the U.S. -- or mid-May for the first quarter. The commission may bring forward by 25 days its GDP forecast -- based on a model that includes car sales, consumer confidence surveys, construction activity, the spread between European and U.S. bond yields and the euro's exchange rate -- to publish on the same day as Eurostat's flash estimate for the previous quarter.
Speed Is New Priority
Eurostat's GDP estimate will use indicators normally used in compiling national accounts, such as industrial production and retail sales, as substitutes for countries that don't publish GDP figures in time. Italy and the Netherlands publish their GDP figures in time to be included in Eurostat's new estimate. ``It was often the slowest member state that determined the pace of the publication of European data,'' said Steven Keuning, head of the ECB's statistics department. The goal now is to equal ``the fastest member states'' in the timeliness of European GDP releases. The most important statistic for monetary policy is the inflation rate, Solans said, and it's also the speediest. Eurostat makes an inflation estimate at the end of the month, before U.S. numbers are available and in advance of ECB rate decisions. ``The flash estimate is useful because it gives us a first idea of what happens in the month,'' Solans said. Based on inflation figures from Germany, Italy and Belgium, as well as the oil price, the flash estimate has correctly predicted the rate of price increases 15 times in 26.
`Room For Improvement'
Solans said there is ``room for improvement'' in European statistics. In particular, he wants a ``full system of quarterly accounts for households, corporations and the government,'' as well as improved labor market statistics and more information about prices in the service industry. Still, ``our statistics are good enough to take appropriate monetary policy decisions.'' The ECB prefers to look at data for the euro area as a whole, and hopes to persuade countries to accept a `Europe-first' approach to statistics, where European data is published on the same day as the fastest national statistics, he said. ``There is nothing more important for monetary and fiscal policies than trustworthy statistics,'' he said. The ECB is assessing how it conducts monetary policy, and will publish its conclusions before the end of June. This might lead to a change in the bank's two-pillar strategy, which sets limits for inflation and money supply, allowing more focus on growth. ``I expect the two pillars to be unified into one,'' said Schmieding. ``I would hope the definition of price stability will be revised to around 2 percent, and not below 2 percent, which would bring the strategy in line with what the ECB has been doing.'' //www.quote.bloomberg.com