CBI business optimism

Surveys of opinion can be unreliable. In July 2016 the CBI survey showed a dreadful minus 47, compared to a minus 4 in January 2016. At the time I thought it an odd reading predicting a downturn we would not experience, as time proved to be the case.   Today’s survey shows a surge to plus 15 for this January, implying good growth to come. It’s a great turn round in sentiment from ultra pessimism last summer.

More reliable order book figures show plus 15 this January, compared to plus 5 last January. This is a better indicator of more growth to come. Why are some forecasters still expecting a big slowdown?

 

 

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19 Comments

  1. Anonymous
    Posted January 25, 2017 at 4:08 pm | Permalink

    A slow down is coming because of scorched earth.

  2. Chris
    Posted January 25, 2017 at 4:30 pm | Permalink

    I see the Dow has broken through 20,000 points for the first time in its history,
    “continuing an extraordinary run that began on the morning after Donald Trump won the presidential election” according to Breitbart

    • Lifelogic
      Posted January 26, 2017 at 3:45 pm | Permalink

      A sensible indication of a similar direction of travel from our dithering government would have helped UK confidence too. Alas we had the reverse in the main.

  3. ian wragg
    Posted January 25, 2017 at 4:45 pm | Permalink

    Why are some forecasters still expecting a big slowdown?
    because lots of them backed the remain camp and want to see us fail.
    Many organisations have egg on their faces and would love too see us take a fall, that is why we must have a complete Brexit not some fudged halfway house.

  4. Big person
    Posted January 25, 2017 at 4:49 pm | Permalink

    The CBI is wrong.
    The Labour Party,SNP and even the Lib Dems must be defeated absolutely.
    No major intelligent employer is going to risk investing long-term in the UK while backward, childish, 19th century politics are taken seriously here.

    Let’s face it, Mrs May cannot find above a handful of people in the top ranks of the Tory Party whose remarks about Trump would not cause her embarrassment if they tagged along on her visit to see him like cheeky kids.

    She would be better advised to take you yourself JR. Whatever your personal ideas, right or wrong about Trump you are sensible enough not bleat them out in Parliament or on chat shows like an hysterical juvenile clown

    • Mitchel
      Posted January 26, 2017 at 10:30 am | Permalink

      Yes and I do wish people would not get overexcited about the likely nature of the relationship between Trump and the UK because whilst he may have some affection for Britain with his Mum being Scottish and all that and drawn inspiration from the Brexit vote,I suspect he will view the British Establishment much as he views the American-they are of a muchness after all.His quip about the BBC after the CNN carcrash at his first press conference was instructive-“BBC News?There’s another beauty!”.That seemed to be edited out by both the BBC and Sky in their news coverage of the event.

  5. Mark B
    Posted January 25, 2017 at 4:49 pm | Permalink

    There will be a slowdown if the President Trump begins to raise interest rates. The UK housing market is in a bubble and it seems that it is beginning to deflate. Well in London at least.

  6. Lifelogic
    Posted January 25, 2017 at 5:48 pm | Permalink

    Indeed. This is largely because the BBC, the government, Osborne, Carney, nearly all the state sector, the BBC and EU “experts” told them what to think.

    The BBC in particular kept framing the argument in the form “will the economic damaged from Brexit be a price worth paying?”, as if this were a given truth. Just as they push the man made, catastrophic runaway climate change religion as if that were.

    There are however some good reasons for some pessimism Theresa May and Hammond being the main ones. Her answer to Ed Miliband’s question today, showing she has swallowed the alarmist religion wholesale was depressing. Hammond’s Autumn statement was a huge waste opportunity too.

    Indeed May is politically just the same as Ed Miliband. A lefty, interventionist, tax borrow and waste, climate alarmist, vanity project pushing, red tape, big state enthusiast.

    Let us hope Trump’s energy and other advisors can make her see some sense and get real. Perhaps she should have a chat with Arthur Laffer while over there too.

    • Sir Joe Soap
      Posted January 26, 2017 at 12:50 pm | Permalink

      BBC have started on Trump now. A guy called Raggy Omar started the news by referring to Trump’s “shocking” statements. Why add an emotional word to the news anyway, and why shocking? Anyone with half an ear to the TV has known this for months. The emotion added to the news should be relief, if anything.

    • lojolondon
      Posted January 26, 2017 at 1:43 pm | Permalink

      Totally agree with Lifelogic. The main culprit is the BBC. They ‘reward’ politicians who follow the message with easy interviews and lots of publicity, and ‘punish’ intelligent politicians with tough questions, fake news, and focusing on the wrong thing, or ignoring the right thing.

      For example, here are the five top headlines on BBC news US website today – http://www.bbc.co.uk/news/world/us_and_canada
      1 Mexico will not pay for Trump wall
      2 Trump insists waterboarding works
      3 Albright ‘ready to join Muslim registry’
      4 May urged to tackle trump on torture
      5 Ex-CIA boss condemns Trump

      On NO page on the BBC – the Trump Bounce – the Dow Jones Index has been rising steadily since the inauguration and yesterday hit 20,000 for the first time ever.

      Ironically, the last headline is the only news that matters – the rest is propaganda and agitation against a foreign president, personal opinion and absolutely none of our business!

  7. Iain Moore
    Posted January 25, 2017 at 5:54 pm | Permalink

    Strangely I haven’t heard about the good order book figures, but I did hear the BBC suggest the difficult market conditions BT was finding with industrial clients was clear evidence of gloom, doom, and complete economic melt down.

  8. Jack
    Posted January 25, 2017 at 9:29 pm | Permalink

    I should rephrase: the budget deficit is, and has been for decades, far too small, but it has been just large enough to keep the economy humming at (a terrible) pace of about 1-2% per annum.

    Now the budget deficit is getting so small it’s actively going to start causing instability for the private credit structure, unless maybe a weak GBP results in just enough aggregate demand to keep the economy afloat… for now.

  9. Original Richard
    Posted January 25, 2017 at 11:22 pm | Permalink

    “Why are some forecasters still expecting a big slowdown?”

    Because their jobs hang on their ability to predict the financial future of the UK.

    In the case of the Governor of the Bank of England he has to decide whether to act in the best interests of the UK or whether to protect his reputation for predicting the UK’s future financial position.

  10. Lindsay McDougall
    Posted January 26, 2017 at 3:12 am | Permalink

    Now you know what pseudo-random number generator is.

  11. Denis Cooper
    Posted January 26, 2017 at 8:19 am | Permalink

    Our economy will take a hit when the EU insists on needlessly taking us back to the old days when there were tariffs on the two-way trade between the UK and the continent, but with the tariffs only affecting our exports to them and not in any way affecting their exports to us.

    • Peter Martin
      Posted January 28, 2017 at 11:40 pm | Permalink

      Denis,

      Consider the situation where two economies A and B are trading equally with each other and without tariffs. The Government of A then changes its mind to impose tariffs. Say a flat rate of 5%. Country B unsuccessfully argues against tariffs but then follows suit and uses the 5% on the imports from A to compensate its exporters so they are unaffected. Importers in country A then end up paying the same price as previously.

      Exporters from country A then find the profitability squeezed due to the 5% tariff. They have to lower their prices to maintain market share.

      So the upshot of all this is exactly the same as if country A had imposed a 5% tax on its own exporters.

      It would be even worse if it was country A which was the net exporter.

  12. Antisthenes
    Posted January 26, 2017 at 11:02 am | Permalink

    By now progressives and assorted lefties should have figured out the simple truth that human behaviour is not predictable. Which poses a problem for their ideologies and the predictions about future events as they all require us humans to behave uniformly. Hence the rise of political correctness and efforts to influence future events by nefarious means. Dissemination of falsehoods, deceit and manipulation are just part and parcel of them turning us into automatons.

    Without which they know their ideologies will fail as they have always done in the past as humans have differing ambitions and needs and will compete to achieve them (an anathema to progressives). Which gave rise to voluntary markets and the impossibility for any other imposed system to replace them with anything like the same beneficial results.

  13. hefner
    Posted January 26, 2017 at 6:46 pm | Permalink

    An interesting contribution by Martin Wolf in today’s FT (26/01) about productivity in the UK and why it is so low compared to that in other similarly sized countries.
    It is to be hoped that the main points are taken on board by the PM and her Government.

  14. Peter Martin
    Posted January 28, 2017 at 11:23 pm | Permalink

    Why are some forecasters still expecting a big slowdown?

    The main reason for worry is nothing to do with Brexit but if there is a slowdown it will certainly be blamed on Brexit. So Brexiteers shouldn’t be too complacent! They (we?) are very likely to end up being scapegoated!

    The potential problem is caused by high levels of private debt in the economy. If I borrow some money now I can buy a new car. That will stimulate the economy. But inoated the months to come I’ll have less spending money than I would because of the repayments and the interest I’ll have to pay on the loan. This will have a depressing effect on the economy.

    Looking at it from the Govt’s POV, (or the central bank’s if we believe the fiction of their independence) they’ll then have to reduce interest rates to encourage more lending to offset the effects of previous lending.

    The neo-Keynesian concept of using interest rates to regulate the economy is fundamentally flawed. They are close to zero and cannot go any lower. It is really the end of the road for this concept.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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