The Treasury short term forecasts are wrong again

The Treasury’s short term forecast said fear of Brexit and Brexit would raise the government borrowing rate, depress sterling, lower share prices and tip output and sales into recession.

As the markets now rate the chances of Brexit at 35% compared with thinking it totally improbable earlier in the year you would expect around 35% of the adjustments the Treasury forecasts to have taken place. So what has happened?

Government 10 year interest rates have fallen from 2% at the start of 2016 to 1.14% yesterday, instead of rising as predicted.

Retail sales are up 6% year on year in May, including a strong May itself, instead of keeling over owing to waning confidence. The May figures are higher than pre Referendum levels and growing faster.

Industrial production is up 1.6% year on year in the last figures, instead of falling.

Sterling is at $1.46 compared to the low of $1.38 at the end of February. George Soros is likely to be wrong with his prediction of a large fall in sterling, which many have been trying to create by their words and by selling our currency for weeks without success.
FTSE 100 index was at 5537 on 11 February, and is now 6200. UK shares have followed a similar pattern to other advanced share markets without showing a worse Brexit linked performance.

The Treasury can’t even forecast three months at a time and get it right. They just know how to scaremonger to get it wrong.

It is most unpleasant to watch the UK’s authorities trying to talk the pound down and shock people into losing confidence. Instead of the government seeking to reassure and to stress what is going right, they seem to be watching for any negative figure which they can light on and publicise as evidence of Brexit damage.

Some weakness in housing sales reflecting deliberate policy actions to hit the top end property in London and Buy to Let is attributed to Brexit. Unfortunately for the Remain campaign as we get close to the vote instead of plunging into recession the economy generated more jobs, retail sales accelerated and industrial output expands. Interest rates fall in the markets and real incomes expand.

The economists who use the same or similar models to forecast a poor outcome after Brexit belong to the school of thought that you must put gloom into the forecast. That means you get gloom out. Brexit so far has not hit confidence nor jobs. I see no reason why A pro Brexit vote should do so. Our trade is not at risk and the UK will still be a good place to invest.


  1. amelinixon
    June 17, 2016

    I have every confidence that the people of the UK will rise to the challenge of an exit and will relish rowing their own boat. Exciting times ahead. All we ever hear is how bad everything is and how we must take nasty medicine. I am sick of hearing the negativity.

    1. Jerry
      June 21, 2016

      @amelinixon; “I am sick of hearing the negativity.”

      Indeed, the negativity shown by people like Mr Farage has been appalling…

    2. DaveM
      June 21, 2016

      Thumbs up, smiley face.

  2. Lifelogic
    June 17, 2016

    Indeed, as you say the Treasury can’t even forecast three months at a time and get it right. They just know how to scaremonger to get it wrong.

    The bias & political posturing of the Treasury and indeed Mark Carney and the BoE is totally unacceptable. Both should be fired.

    You “say some weakness in housing sales reflecting deliberate policy actions to hit the top end property in London and Buy to Let is attributed to Brexit.” Indeed if you make people pay up to 15% duty rates on purchases (totally dead money they may never get back) then you tax landlords on “profit” they are not even making, then you have the attacks on non doms and the enveloped dwellings tax, the CGT extension to overseas buyers and a 28% CGT rate (without even any inflation relief) then it is hardly surprising you get some weakness. Osborne is the direct cause of this weakness as he clearly must know the man must go on 24th June.

    The fundamentals of the economy improve greatly on Brexit. No WU fees, less red tape, half priced reliable energy, no green crap, no Osborne, quality only immigration, free trade with the world, away from the EURO disaster bail outs, nimble democratic/UK based government acting in the UKs interests. What is not to like?

    1. Lifelogic
      June 17, 2016

      It was dreadful to hear of the Murder of Jo Cox yesterday. My sympathy goes out to her family and friends.

      I cannot however see why the BBC cancelled Question Time and politicians stopped their referendum campaigns.

      There are about 10 murders every week and 2 of these are by people with mental health issues. MPs must know this and they are responsible for the very poor mental health care we have in the UK.

      Except of course that many from the remain camp are actually trying very hard to use this tragedy to advance the remain cause.

      1. Richard1
        June 21, 2016

        I don’t see suspension of the campaign was right and nor do I think the by-election should be uncontested. This did not happen after the murder of Ian Gow. The message should be that our democracy is robust and continues come what may.

    2. Lifelogic
      June 17, 2016

      I see that Michael Deacon in the Telegraph says “We should say it more: our MPs are brave and decent.”

      Well some certainly are and some are anything but decent, perhaps 50/50. Many are just career politician of the worst sort who will lie, lie and lie again to get elected or to be promoted. Many are clearly quite happy to steal from the public purse too, as we saw in great detail.

      Many more, especially on the left, like Ed Milliband, were happy to propose stealing off landlords, in a pathetic attempt to try to buy the votes of some tenants. Some make “no if no buts” promises they know full well they cannot keep. Or debase their offices to present Brexit “we will mug you if you dare to vote leave” Budgets.

      1. Hope
        June 21, 2016

        The rotten standards have not changed. There are a few, however in 2009 the majority were either fiddling or being over paid. Too many for it not to be institutional corruption. Not just expenses but honours, lobbying, and the rest of it. No substantive action to date despite promises of reform. The same sort of reform claims by Cameron in the EU!

      2. graham1946
        June 21, 2016

        Stealing off Landlords?

        Is that like the Tory idea of forcing housing associations to divest themselves of their stock at a reduced price or are you merely complaining about tax again? Are they making you sell at reduced prices?

        Landlords are like bookies, always on the winning side. You just jack up the rents whether justified or not.

  3. MDS
    June 17, 2016

    In a little over a week we make the biggest national decision we will ever make

    Please Vote Leave

    It will be the third time in a century that this country has played a part in the rescue of the people of this continent from its politicians

    Love Europe, Love Europeans, despise the EU

    WTO trade tariffs will have less effect than currency fluctuations and far less effect than the cost of fuel a couple of years ago, I doubt there will be tariffs in reality as the German car makers sell us one fifth of their entire output

    Its great products and trusted services that make sales not trade deals. The worst we will have is WTO rules access to the single market

    But here’s why even that tame worst case scenario is not likely. France, Holland and Italy have a higher proportion of polling (a 10,000 strong poll in one case) against the EU. So this is why I believe in the use of the term “rescue of the peoples of Europe.” Our departure will most likely be the beginning of the end of this sorry excuse of a project

    It will be 1989 all over again. From the exodus of people from Soviet Hungary to the fall of the Berlin Wall. If we vote Leave the EU is most likely finished

    What was said in a debate last week?

    If you want advice on bridge building, go to an expert bridge builder

    If you want advice on what will happen to our economy? Do not listen to the alleged experts. They have an agenda and have been curiously wrong on every occasion to do with the EEC/EU

    ERM – must join it they said –
    15% interest rates, independent businesses going to the wall, house repossessions

    ERM – don’t leave it they said –
    We did leave and had 16 years of unprecedented growth under Tories and Labour

    Euro – we must join or we will face all the things they threaten now

    We didn’t luckily, but the pure evil that the “little EUers” inflict on the people of southern Europe to keep their pathetic little project on the go is vicious and shows their absolute lack of compassion for anything in the way of their silly little political toy

    The EU is a self-serving customs union. If it had been an agreement between neighbours for trade it would be a good thing. It’s a political toy for people who love their own ideas too much. Its executive is not accountable to an electorate

    But the House of Lords isn’t accountable? Nonsense. The House of Lords can’t propose legislation. It agrees or disagrees with Commons Bills and recommends amendments for the Commons to think about. The Parliament Act can overrule the Lords if needs be. The unelected EU Commission is an executive with absolute power to issue directives

    Remainers seem unable to differentiate Immigration with Uncontrolled Mass Immigration. No doubt its effect so far has only really been on those in the unskilled parts of the labour market. The minimum wage was a safety net, now it’s a target. Wait until things get so bad in southern Europe that they have gold rush style ghost town scenarios and the minimum wage becomes normal higher up the employment food chain here in the UK. When it’s the children of Chipping Norton facing a bleak outlook too, it’ll be too late for the smug classes to regret sneering at us “uneducated knuckle dragging backwater little Englanders in the East”

    One can only admire the courage of uprooting yourself or your family to move hundreds of miles for a better life but it was never matched with infrastructure here to cope. If the EU machine was of any use at all it would have stopped playing with its desired toys and removed the demand to need to move. But no, its monopoly money matters more than the youth of Greece or Spain. The EU needs throwing into the sea

    Will no one on the remain side concede that with the volume of immigration to the UK in such a short space of time, there’s been a demand on housing that it has CONTRIBUTED to. (Not caused, contributed to).

    The list of great things the EU has allegedly done for us are all examples of things we can do ourselves. Evidence, the NHS

    UK employment rights go further than EU rules too so don’t believe the nonsense about them, they have increased under both parties without EU nudging

    Google any of these facts and think through the logic for yourself, but please Vote Leave, for us, for our children and for the peoples of our neighbouring countries

  4. Steve Evans
    June 17, 2016

    So you’re not suspending campaigning?

    HAVE SOME RESPECT for God’s sake

    Reply I have and have corrected the time trigger on this which I wrote before the tragic death.

  5. Steve Evans
    June 17, 2016

    And while you’re at it, condemn Farage’s hate filled poster from yesterday.

    Don’t think words don’t have consequences

    1. Richard1
      June 21, 2016

      All these attacks on Farage are humbug. The fact is there is widespread public concern over immigration and if Brexit wins this will be the reason.

    2. Leslie Singleton
      June 21, 2016

      Absolute rubbish. Tensions caused by unlimited immigration undoubtedly exist. Impossible to predict how these tensions will seek release. Better not to have the ridiculous levels of uncontrolled and uncontrollable immigration in the first place. Enough is enough.

  6. Mark B
    June 17, 2016

    Good morning.

    Garbage in, garbage out. That is the saying that I have heard from people who program computers for a living. If the information that you put into the model is wrong, be it financial or meteorological, then you output is going to be flawed.

    So in essence, you have to question where they are getting their information from ? If they are plucking figures from out of thin air to fit a political narrative, then you can be sure that is where the problem is. Which begs the question. Is this lawful ?

  7. Javelin
    June 17, 2016

    Are the political polls being manipulated for political purposes.

    I just had a look at William Hills corporate resolutions and see they have authorised large payments to EU political parties.

    Given the polls are showing a lead to leave but northern bookies I am wondering whether it is in William Hills overall strategy for profits to stay in the EU and the odds they are giving are a common loss leader.

  8. Jerry
    June 17, 2016

    Appalled, there is a time to be campaigning, we have been told by both sides that referendum campaigning has been cancelled, so at the very least I expected to be reading some general generic comment about the work of MPs this morning, if not specifically the senseless events of yesterday. I can only assume and hope that this article had been preprepared and has been published by accident.

    Reply Yes this was prepared before the tragic events of yesterday. It published automatically on a time trigger which I have now adjusted.

    1. Edward2
      June 21, 2016

      Are you “appalled” Jerry?
      How sensitive and politically correct you are.
      It’s a very odd “no campaigning” when Corbyn, as just one example, is interviewed on TV
      Then TV and radio news give us reports every few minutes from various think tanks saying how many problems would be caused by leaving

      1. Jerry
        June 21, 2016

        @Edward2; Did you bother to read our hosts footnote reply, or take note of the date and time-stamp, perhaps you should…

        Unlike some, I said very little on the 17th, other than the above comment (which wasn’t published until today) and one to post my condolences, nor do I recall many if any politico ‘campaigning’ before Sunday, but of course that did not stop people like you and Farage claiming otherwise.

        So once again Edward2 you jump in with both feet, trying to bully me, when all you have actually done is proves once again that you never read what others actually say or take note of the context in which something has been said.

        1. Edward2
          June 21, 2016

          Calm down Jerry
          The news media over the last week has been doing loads of reports on the EU referendum and associated topics.
          Perhaps you are also appalled by this too?

          1. Jerry
            June 21, 2016

            @Edward2; You need to learn the difference between reporting on something and campaigning for something.

        2. Edward2
          June 22, 2016

          I suppose it’s in the eye of the beholder Jerry
          Like bias is for you.

    June 21, 2016

    I see Mr Soros is all for Remain. Twitterers of Remain seem jubilant but never mention…I’m sure they do not know..that Mr Soros benefited enormously ( and legally it should be said ) when the stock markets took a major dive as we quickly exited the ERM. He had predicted it. He had worked for it. He is quite an expert in market movements. I wonder if he will earn a Bob or two if we Remain or perhaps lose a few pennies if we Leave.
    We’ll see .

    1. graham1946
      June 21, 2016

      I would be very surprised if the gamblers didn’t have a position in the market for probably the biggest period volatility in ages. They will make sure of it. Why is it being reported? It’s not news, it’s just an effort to tilt the table. I can’t do it when I take my petty little positions. Its what gamblers live on. Buy on the rumour, sell on the fact. Either way they will have positions to make a profit – almost or maybe, even arbitrage.

      I see the Italian CEO of Vodaphone is on the news this morning strongly against Brexit. What a surprise. What all these people have in common is that they are all super rich. They won’t be affected in any way regardless and they certainly don’t give a damn about the lower orders having to live with the consequences of free movement, wait for doctors appointments, not getting housing or school places. They won’t be paying the bills when they come in for Greece and Italy. The Leavers should hammer this home in the last couple of days. Remain is for the rich, Leave is for the people.

      Cameron is denying Steve Hilton told him 4 years ago that he could not get the immigration down to tens of thousands. Someone is lying. I know who my money is on.

    June 21, 2016

    “Markets hate uncertainty” is the oft quoted mantra. A generality. There are several tiers of markets within the mainframe: The Market.
    Uncertainty is a sure-fire way on THE Market to make loads of money or lose it. In fact many investors and speculators pray for uncertainty.
    The great waves of coincidental stock market, gold and currencies rises, and oil fluctuations across the board and simultaneously throughout the world is not so much a put up job but an indication of momentum-speculation. It lacks any substance or it would be more fragmented and, unpredictable,and, uncertain.
    The Remain Camp and its allies are fighting for their jobs. If they lose the vote, within three months their predictions and fear tactics will be an open book. What “Expert” will remain so after the 23rd June? None.
    etc ed

  11. hefner
    June 21, 2016

    “As the markets now rate the chances of Brexit at 35% compared with thinking it totally improbable earlier in the year you would expect around 35% of the adjustments the Treasury forecasts to have taken place.”.

    Only if one is stuck with LINEAR thinking… A bit limited, isn’t it. Certainly not George Soros’s way of thinking, I guess.

  12. Jerry
    June 21, 2016

    John, is George Soros also wrong, a man who has quite literally made his fortune on forecasting money and economises correctly?…

    Reply Yes. He’s got trades wrong as well as one we know about famously right. I also correctly forecast the disaster of the ERM.
    Always ask a trader who expresses a view what his own position/book is.

  13. Pauline Moorhouse
    June 21, 2016

    These so called experts. The banks, why should be believe a group who we have baled out, have defrauded us and pay themselves wages and pensions we cannot even dream about and actually couldn’t live with when so many people are hungry. The economists. Academics who couldn’t predict the crash out of which we paid billions to the banks. The investors who were probably saved from ruin had we not baled out the banks and who now languish in front of their computers manipulating the markets. The global companies who don’t give a dam about ordinary working people and the academics who are simply academics. Yes I would ask a bridge builder to build a bridge. I would need experts to do the actual building, just ordinary people who are good at their craft. These so called experts used by Remain just play with people’s lives and are so far removed from reality.

  14. ian
    June 21, 2016

    Total borrowing this year set at 55.5 billion, first two months 17.93 with 10 months left.

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