A ‘triple dip’ sounds like a move that might defeat a drug-pumped Olympic gymnast, but it’s what some City pundits now expect the UK economy to perform. After a 0.7 per cent drop in GDP between April and June — the third consecutive quarter of the double-dip recession — a ‘technical bounce’ should make the rest of the year look relatively healthy. But continuing chaos in the eurozone combined with a stalled US recovery, a slowdown in China and whatever happens next in the vicinity of Iran and Syria could make everything go pear-shaped again in 2013. And that’s really as much detail as you need on this topic, because if there’s one thing we’ve learned over the past five years, it is that, by and large, economic forecasting is baloney.
Indeed, the more detailed and authoritative the forecast — most especially when it comes from the Office for Budget Responsibility — the higher the chance it will turn out to be a load of old cobblers. This is not to suggest that all forecasters are fools and knaves. I have dabbled in this field from time to time myself, and stand exposed as the man who wrote in 2008, and again in 2010, that the UK economic cycle would launch definitively into an upward surge last Friday night, taking its mood and cue from the Olympic opening ceremony — a forecast that has now gone the way of Tom Daley’s fourth synchronised dive.
The truth is that economic soothsaying is all but impossible in an era when global activity is so much at the mercy of political folly and the whim of market sentiment. The only recent forecast worth listening to was the least precise: ‘I don’t think we’re halfway through [the crisis],’ said Sir Mervyn King, ‘My estimate of how long it will take to recover is expanding all the time.’
In April this year I reset my own countdown to the next upswing to coincide with the Commonwealth Games in Glasgow in July 2014, but the Governor might still think me a deluded optimist if I now switch to 5 August 2016, the opening date of the Rio de Janeiro Olympics.
Anyone for 2020? Istanbul, Madrid or Tokyo; boom, bust or quintuple dip? Frankly, my friends, we haven’t a clue.
Here and now
So let’s focus instead on the here and now, and the more pertinent question of whether quarterly GDP growth figures really give an accurate indication of the health of the economy. That frightening 0.7 per cent fall is based, we’re told, on incomplete survey data bolstered by educated guesswork for the month of June, mashed together in a heavily guarded Office for National Statistics bunker somewhere near Newport. The figure is highly likely to be revised, and may go on being revised for several years as the data hardens. It reflects a slump in reported construction activity, but the overall picture it gives of the UK in a steeper recession than Spain, where the second-quarter drop was only 0.4 per cent, is, to say the least, odd. All sorts of other indicators suggest the situation is really not that bad.
First, employment. In the two years since George Osborne began to swing the axe which his enemies say has done so much damage, the private sector has created two new jobs for every public-sector job slashed. For much of this year, in defiance of the double dip, our economy has been adding more than 50,000 jobs per month. Many of these are self-employed or in start-up businesses that may not survive — but those are signs of underlying optimism in themselves. And the number of 16-to-24-year-olds looking for work (around 21 per cent, compared with more than 50 per cent in Spain) actually fell by 10,000 in the three months to May.
Even in the construction sector, afflicted by the end of the last wave of Gordon Brown’s public-sector building boom, recent labour force numbers were up on a year earlier. Our manufacturers have undoubtedly been having a tough time lately, but — with automotive, aerospace and high-end engineering to the fore — their tone is still one of confidence for the longer term. Jaguar Land Rover announced another 1,100 new skilled jobs last week and its executives must be exhausted by the stream of ministerial visits they have had to host. Meanwhile, a wide range of other companies — Rolls-Royce, Centrica, BSkyB, ITV, even the pariahs of HSBC and Barclays — have reported increased profits.
Then there’s inflation, which slowed to 2.4 per cent in June from a peak last year above 5 per cent, and should go on falling. That’s partly a reflection of global frailty translating into weaker demand for oil and other commodities, but it has the positive effect of shrinking the gap between price and wage rises that has blighted consumer spending since the onset of the first dip.
No growth this year, not much next year: that’s the forecasters’ consensus. But another body of opinion says that these dismal GDP figures, like Team GB’s ranking in the Olympic medals table, tell only part of the story; there’s much more to be pleased about going on underneath. Someone should invent a comprehensive economic index: who knows, it might prove 27 July 2012 to have been the turning point after all.
Thundercliffe and Groucho
Regular readers already know that I place more faith in parables from my Yorkshire home town of Helmsley than I do in economic forecasts. In January I reported that last year’s best start-up, a fishmonger called Thundercliffe, had closed within three months because of problems over his shop lease. ‘If he makes a comeback in 2012,’ I wrote, ‘that really will be a sign of recovery.’ He reopens next week, in fine new premises. I won’t be here to celebrate with him because I’m off to France for August — and will send weekly parables from there. But I leave you with the wisdom of Groucho Marx, whom I have been impersonating in our box-office-record-breaking Ryedale Festival: ‘No, my friends, money is not everything. And everything is not money. And for all I know that’s an epigram.’