With England 61 runs ahead of the Australians in the fourth Ashes test, their opponents having lost five wickets in an undistinguished second innings and two days of play ahead, it may have seemed a reasonably straightforward task to predict the future score. Alas that was not to be the case. So when even a body as acclaimed as the EY Item Club have a go at telling us not only their expectations for UK economic growth next year, but what they foresee for 2025 we really should be reaching for the condiment cupboard with our fingers readied for much more than a pinch.
It really is sweet that economists are still 'having a go' and telling us online what they believe (often pretty stridently) will happen in the next six months and often beyond. Of course they will be wrong, often quite tragically; but good on them for having a go and charging their bosses a lot of money to put together figures which will probably only be plausible for a fortnight.
On message, the aforementioned EY Item Club have now more than halved their predictions for UK growth in 2024 from 1.9 per cent to 0.8 per cent, and their projections for 2025 have likewise been cut from 2.3 per cent to 1.7 per cent. For lo the tealeaves hath formed a shape pertaining to a woodlark's tail, the bird of misfortune. The Bank of England are all over this as well, chopping future GDP numbers at will (although on the other hand they did forecast a sunny and dry weekend in Manchester).
The reason for the EY Item Club's 'adjustments' are 'stubborn inflation' and 'persistent rises in interest rates', which could not have been predicted, despite the fact that inflation was at a record breaking high the last time they put their numbers together and the Bank of England have (to date) raised interest rates thirteen months in a row.
Martin Beck, chief economic adviser to the Club said: “Should inflation prove more stubborn than expected, the prospect of even more rate rises than we expect will come very much into play. On the other hand, the potential is there for inflation to fall faster than expected, as June’s outturn demonstrated”. This is clearly another version of "Heads or tails?"
Best of three, Mr Beck?
The average salary advertised by employers rose by an annual 3.6 per cent to £37,807 last month, up from a 3.3 per cent increase in May and 2.9 per cent in April. There are some signs that the jobs market is cooling. While the number of UK vacancies increased in June on an annual basis to 1,059,153, up by almost 1 per cent from May, job openings were down by 12 per cent, although the rate was less than 17 per cent in May and the almost 19 per cent figure recorded in April.
This is a key driver of inflation, which is itself a key driver to interest rate rises, which is itself a key driver to a reduction in consumer confidence, which is in turn a key driver to low GDP numbers
The truth is ... no-one knows.
