In the March budget the Treasury forecast 2% growth for the UK in 2016 and 2.2% growth in 2017. The Bank of England and many private sector forecasters were there or there abouts.
Then along came the Brexit vote. Many of these official and professional forecasters wanted to remain. Their original forecasts assumed we would vote for in, as it turned out their political forecasting was hopeless. So now they want to make sure their economic forecasting is equally hopeless. They mostly have slashed their 2017 forecast to negative, or a maximum of plus 0.8% which is where the Bank of England has reached after its third re forecast of the year.
So we have to ask why? They say they now think the UK will flirt with recession in the 3rd and fourth quarters of 2016 as a result of the shock of Brexit, and will continue to stumble next year. Apparently confidence is going to collapse, and with it consumer spending, investment and property. You may remember the Treasury talking about house prices tumbling 18% in due course, and the Bank in May telling us we could well enter a recession.
If confidence is going to be that badly hit as they say, you would expect the hit to be at its worst immediately after the vote. For those who are shocked into negative thoughts by a Leave vote, the pain is clearly greatest as soon as you learn. Like most sad knocks in life, time heals or eases the worries. That’s why it is important that in July retail sales were 5.9% above July 2015 and well up on June 2016;car output was 7.1% up; Persimmon’s reservations of new homes were 17% up on July 2015; and house prices generally are about the same on average, with falls largely confined to expensive parts of London which have been falling since the new Stamp Duties came in in April.
When I was on the losing side in the previous European referendum I remember being unhappy for a bit, but I did not stop buying the things I needed. I thought the country would be poorer as a result of the EU contributions and the costs of the system, but I did not think this would be the main influence on economic activity.
I am sticking with over 2% growth for 2017. I suspect the only question is, how long before other forecasters get back there, after a period of wearing their Brexit glasses of doom in denial of the evidence.