Ups and Downs

Presenting to the Treasury Committee yesterday, Mark Carney explained away the poor Q1 growth figures on ‘idiosyncratic factors’ (e.g. the weather). On that basis, his forecast for the full year is more optimistic. Nevertheless, Carney took the opportunity to compare our present economy with the economy that was forecast immediately prior to the referendum. The differential is c.1% of GDP, or otherwise put, real incomes are down £900 per household relative to expectations. This is in spite of the post-referendum stimulus applied to the economy, and in spite of global growth which has performed above expectation. Adjusting for these would put the differential nearer to 2.0%. Hindsight is a strange thing and forecasts can change quickly. At C&W we analysed 34 forecasts for 2017 real GDP growth made in the month after the referendum. The range was from -1.0% to 2.7%. The mean was 0.65%. In the final event, 2017 growth was 1.8% (almost three times the mean prediction). The weather might, in fact, be more predictable.