The following opinion was conveniently missing from today’s gushathon at the Daily Telegraph…
“The upgrades to our growth forecasts are largely due to revisions to historic GDP data by the ONS.”David Kern, Chief Economist at the BCC
The new BCC and BDO forecasts filling the financial and business pages today can be revealed as risible nonsense – simply by reading the original reports. The Slog deconstructs the drivel.
A week before George Nobsore is promising to present “even brighter” economic growth forecasts, the British Chambers of Commerce (BCC) said the economy would “fully recover” in 2015, rather than the 2016 it predicted last year. (Hint: the General Election is due in May 2015)
“Our economic recovery is gaining momentum. Businesses across the UK are expanding and creating jobs, and our increasingly sunny predictions for growth are a testament to their drive and ambition,” said John Longworth, director-general of the BCC. (Hint: he would say that, he’s talking about his members. Flattery is always good for subscription sales)
The Daily Gushograph makes the most of all this guff today, adding that ‘A separate survey by accountancy firm BDO (who they? Ed) showed UK economic output was on course to surpass pre-recession levels by the summer.’
It is, or course, all complete bollocks, and must therefore be deconstructed:
1. I do not know how many times I have to assert this, but the BCC and BDO studies do NOT reflect sales audits, marketing results or anything empirically real at all. They are based on the ‘feelings’ of BCC members and BDO clients. These are merely people who have read all the previous bollocks put out by the Chancellor and his media chums…and thus become ‘more confident’. They show what these members and clients EXPECT, not what is happening.
2. The BCC’s ‘sunny’ outlook is virtually unchanged from the equally ‘sunny’ outlook it put out on 7th January two months ago. But…
3. Four days ago, Legal & General warned that the UK’s recovery would falter once the “monetary methadone” of quantitative easing was withdrawn. They are of course correct.
4.Reuters reports that China is once again showing signs of showdown: exports tumbled in February by 19%, and left the country with a virtually unheard of trade deficit at $23bn. The BDO prediction suggests hopefully that the recovery will be driven by increased consumption because ‘with unemployment falling and output increasing, real wages look likely to grow during 2014 for the first time since the onset of the financial crisis’. That’s just wishful thinking: hours worked are static at best, and welfare incomes are shrinking. And growth isn’t going to be driven by exports either, with the world’s largest economy spiralling down down into a demand-drop slump.
5. There is not a shred of evidence to suggest that the UK’s economic balance between services and products has been changed in any way at all. Services are always the first things to be cut by importers in a recession.
6. Unemployment stopped falling in February, and wages lagged inflation by more than observers had expected. Not many signs of future consumption showing there: a view Balfour Beatty agreed with last month, when it suggested that the UK economy “is at best faltering”.
7. Britain still lags miles behind the recorded recovery rates in the US and Germany….despite the Torygraph article giving the opposite impression with ‘UK business optimism is now stronger than all other major developed and emerging economies, according to Markit.’ Again, this is still feelings, not reality. The UK economy remains 1.4% behind where is was six years ago.
7. Below the headlines and ludicrous optimism, even the BCC report itself shows that the Devil is in the detail:
* ‘UK GDP quarterly growth is forecast at 0.7% in Q1 2014, easing slightly to 0.6% in Q2 2014′ (BCC). Er….
* ‘Major issues remain, such as the unacceptably high level of youth unemployment’ (BCC). Correct: it is THREE TIMES the demographic average. Um….
* ‘Crucially, Britain is simply not investing enough. While business investment is expected to grow, it will remain way below pre-crisis levels for some time. There is also more to do in securing access to finance for growing firms.’ (BCC). Yes indeed, more fine work from the banks. Oooer…
I realise this is all getting repetitive, but I had the same problem rubbishing Obama’s economic lies during the 2011/12 period…also prior to his reelection. This Telegraph piece is simply more piss and wind puffery. We must stick with the fundamentals, because although these can be fudged by central banks, markets, and commodity traders, real live output in terms of sales, margins and exports by product sector cannot be.
The fundamentals show conclusively that Britain still has an appalling trade deficit with an economically static EU and a hard-landing China. The UK is still not making things at either the quality or price that most importers want. Unemployment hours are not growing and neither are wages.
There is no consumer money-gain or confidence to drive domestic consumption, and no buoyancy overseas to drive British exports. This entire codswallop is electioneering…and it can be punctured bigtime by simply pointing that out to the electorate.
Will the Labour leadership manage to do this? I think not.