Breaking: Ed Balls has a point

The games have started a day early, folks. The latest quarterly growth figures are set to be released tomorrow morning, but already Ed Balls is waxing insistent about what they have to be:

“Simply to stay on track for the Office for Budget Responsibility’s most recent forecast, already downgraded three times, we will need to see growth in the third quarter of 1.3 per cent. And to reach the OECD’s latest and more pessimistic forecast, we will need to see a figure next week of 0.9 per cent.”

To be fair — and this is not something you’ll read often on Coffee House — the Shadow Chancellor has a point, although he’s not making it explicitly. When he says that growth needs to hit 1.3 per cent to meet the OBR’s overall forecast for the year, what he actually means is something like, “Ahahahahahahahahahaha, never gonna happen!” And, on that, even George Osborne will agree with him. The consensus is that tomorrow’s number will come in around the 0.3 per cent mark.

This raises the question of whether, as Balls is hinting, the OBR’s current growth figures are too optimistic. And the answer? Yes, they most probably are. There was a time, some months ago, when the OBR’s growth forecasts were broadly in line with what other independent forecasters were predicting. But now, as the eurozone teeters on the edge of oblivion, those independent forecasts have come hastening down, leaving the OBR increasingly isolated:

Of course, it’s likely that the OBR will bring its forecasts down in time for the Pre-Budget Report — although the prospect of being closer to City forecasts will be scant consolation for Osborne. As I’ve highlighted before, the Chancellor’s deficit reduction plans are predicated on the OBR’s growth numbers. If those numbers sag, then everything else becomes that much more difficult. Much to Ed Balls’ glee.