Just when you thought economists might finally have got the message about their doom-laden predictions for the economy following the vote for Brexit, along comes another statistic showing they are still getting it hopelessly wrong. I wrote here last month about how the Markit/CIPS Purchasing Managers Index – an early indicator of economic growth – had moved into positive territory in August, defying predictions that it would stay below 50, a level which suggests a shrinking economy. There was then, however, still one black cloud – the construction industry element of the index stood at 49.3 in August. That suggested that housebuilders and other construction companies were still suffering from the sniffles even though the rest of the economy had been restored to health.
For September, a poll of economists for Reuters suggested that the construction index would fall further – their averaged estimates came out at 49.0. However, when the index was published this morning, it was revealed that it rebounded to 52.3 – following the same pattern as the rest of the economy post-Brexit, albeit a month later.
The shares of housebuilders and construction companies were hit especially hard in the wake of Brexit and have still yet fully to recover. It never was easy to explain why British homebuyers should suddenly want to stop buying homes post-referendum – unless they were taking George Osborne’s bizarre and desperate warning about tumbling house prices to heart. Whatever the outcome of the referendum it was hardly going to correct the chronic imbalance between supply and demand created by a growing population, a planning system which creates an artificial shortage of land and fuelled by a supply of easy credit.
The IMF finally has come round to accepting that its own predictions for post-referendum doom in Britain were wildly wrong. Far from plunging into recession it now expects the UK economy to grow by 1.8 per cent this year – faster than any other G7 nation.
Anyone who did take to heart gloomy warnings from Osborne, the IMF or any other economist has hopefully learned their lesson – that no matter how many doctorates, how many letters after their names nor how pompous their job titles, economists can’t predict the future any more than you or I can.
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