Having done their job today (Monday 27 February) the news outlets are having a sit down with a cup of tea to allow time to ponder. For those impatient with their output it's just a little confusing:
"Is the news good or bad?"
"Neither. Both. Somewhere inbetween."
Just six weeks after predicting swarms of locusts and plague for the UK economy economists are already reeling back on their previous forecasts. Which is early, even for them. In December and January, they expected gross domestic product to drop 1 per cent in 2023. However, the data for the week of 20 February shows that economists are upgrading their forecasts. The average forecast involves a 0.6 per cent fall in GDP in 2023. They don't even appear embarrassed by this elevation in their thinking.
Consumer confidence in February reached its highest level in almost a year, according to research group GfK. Official data about the public finances showed chancellor Jeremy Hunt was on course to net a windfall of £30 billion after the UK recorded a surprise surplus in January, whilst a breakdown of Whitehall spending, presented to MPs, shows big reductions in the budgets of the business and energy department, as well as Michael Gove’s levelling up department.
Small and medium-sized businesses are going a step further. In a survey of more than 1,500 British companies by Boston Consulting Group, 61 per cent said they expected economic output to be “somewhat or significantly better” in 2025. Obviously, the plan is to (a) stay alive, and (b) stay in business that long, but whilst inflation is still perceived as the stickiest issue many of the UK's businesses have a good to strong belief in their futures. One dirty finger in the soup is the fact that the average time small businesses are taken to be paid rose by 0.6 days to 30.5 days last month, and the average late payment time hit 8.4 days, up by 1.8 days. The latter is the highest level since August 2020 during the first lockdown when late payments soared.
There has been a sharp fall in wholesale energy prices, which soared after Russia’s full-scale invasion of Ukraine last February. The UK wholesale gas price is now below £1.30 a therm, half the price of mid-December and down from a peak of £5.95 last August. This has (more cheaply) fuelled expectations that Jeremy Hunt may not proceed with plans to raise the cap from its current annual level of £2,500 to £3,000 in April.
All of this has led economists to vary their predictions about the much-vaunted British recession from definite to bad to possible to non-existent, but the news still hovers just above the "Don't Know" section of the ometer.
