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Sunday, 28 February 2010

UK Q4 2009 GDP revised up

As expected the GDP was revised up to 0.3% in the final quarter of 2009 and could possibly be revised up further at the final reading.  The second reading is based upon 60% of the data needed to make a complete reading, compared to 40% for the first reading and 80% at the final reading.


It is interesting to note that 0.3% is within the forecast estimates given by economists before the first reading came out.  When the preliminary reading was 0.1% (outside of the forecast range) commentators in the press were quick to belittle the economics profession and the forecasts, questioning their competency.  I think it is probably time that economists questioned the competency of the press, who fail time and time again to understand statistics and their limitations.

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Tuesday, 4 August 2009

Manufacturing output and industry jobs

The CIPS Purchase Managers Index (PMI) was released today, recording a figure of 50.8 in July, up from 47.4 in the previous month. With the PMI index rising above 50 the manufacturing sector is now showing signs that it is starting to grow again, although at a very modest pace.

The manufacturing sector joins the services sector in returning to growth, which recorded results above 50 in both May and June and is forecast to expand again in July.

This should be seen as a positive sign that the economy is now past the worst of the economic downturn and is slowly returning to growth. However, at just above the 50 mark the data is not showing a rapid rebound in activity but a very modest increase in activity. Given that the economy has so far shrunk nearly 6% since the end of the first quarter in 2008, it will take either much stronger growth than this or a very long time indeed to return the economy to where it was in early 2008.

Recent data has also revealed that employment expectations in the manufacturing sector are starting to improve. This is not to say that employment in the sector is expected to grow in coming months, but the rate at which it is falling is set to slow.

Manufacturing in the UK has lost around 150,000 jobs since the start of this economic downturn, but it should be remembered that the sector is in a process of long-term decline. The sector lost jobs throughout the boom years of this decade and since 1980 has seen total employment fall by over 40%.

On the whole, today’s result should be seen as a positive but tentative sign that the economy is starting to improve. The economic environment remains fragile and a smooth transition to normal conditions is unlikely. Nevertheless, should this trend continue, the economic outlook could be better than many economists have been forecasting.

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Wednesday, 31 December 2008

Personal lessons from 2008

This year has been one where the word "unprecedented" has been banded about more than I care to remember. Indeed, in recent history this year has been unprecedented, however, over the course of human history or even the last century I think things have been overblown. Commentators and press columnists have both a very short memory and a desire to exaggerate. Yes things are bad, but they have been bad before and we have got through them.

But lessons can and should be learnt from the turmoil of 2008. I'm not talking about lessons for the government or financial system. Clearly there are plenty of lessons to be learnt here and things will have to change. But there are also personal lessons in the way we conduct our lives and see the world.

Here are a few that I'll be taking away with me:

- Pay little notice of forecasts made for more than a year. The difference between the forecasts made at the end of 2007 and the out turn from 2008 has been so large that forecasting the economy has lost a lot of meaning. I find it more useful to concentrate upon the current state of economies and the general outlook over the future.

- Laugh in the face of anyone who tells you that something is obvious or a dead cert. So many people I have talked to over the last couple of years have banged on about the property market and how it was easy to make money. With the market likely to fall around 30% from peak to trough many are now struggling having fallen into negative equity and overextended themselves on their mortgage. Never trust anyone that says "You'll always make money", its either a scam or a sure sign that the market is overheated.

- Plan more for the future. In the recent boom years it has been easy to live for the moment. Saving nothing and forgetting the grand plan. It has been easy to move up the career ladder and simple to get pay increases. However, it should be remembered that the economy is fragile and can turn very quickly. You'll need a Plan B when this happens.

- Hard work and education pays off. The boom times were easy for many people to get by doing the minimum at work. It often seemed to some that a little bit of a loud mouth and a sociable nature would get you further than hard work. Looking at my friends who have lost their jobs and those that are still in work, I would suggest that when things get tough those people who haven't worked hard and don't have their qualifications will be the first to be identified for the chop.

- You can still change jobs in a recession. Although companies are making many people redundant there continues to be churn within the economy as people move company and people retire. Therefore you should not see recession as a time where you have to stay at your current job. You can still climb the ladder even in the bad times...its riskier but higher risks tend to come with higher rewards.

- As bad as it gets...it will get better.

It has been a long hard year but there has been plenty of lessons for everyone. These are lessons for life, that will make you a better person and employee throughout the next lot of boom and the bust.

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Sunday, 28 December 2008

Greedy economic forecasting


I was enjoying the Christmas television yesterday when the news came on the TV. It showed thousands of people rushing into Selfridges on Oxford Street to get the very best sales items they could. Then came the grim news that despite all this it wouldn't be enough to save the economy...according to some economics forecasting house.

This economics forecasting house had released their revised forecasts to coincide with Christmas and the boxing day sales. They were some of the most bearish forecasts around, helping to paint a very bleak and miserable picture at this happy time of year.

What amazes me is how easily these economic forecasting houses abuse the media so freely. This was clearly a bad news story timed for release to coincide over Christmas when a) there is little other news and b) people are thinking about shopping and retail performance.

Worst of all these forecasts are likely to be no better than what the average man on the street could come up with. In these times of uncertainty these economic forecasting houses have so little idea about where the economy is going that any forecasts made beyond next week are pointless.

The independent forecasters tend to have teams of about 10 people. Many of them will be newly out of university and not working specifically on macroeconomics. Most of the forecasts will have been dreamt up to be both headline grabbing but also near enough to the general consensus of the time. As a result we get these slow creep as forecasts are constantly revised each week.

Don't get me wrong forecasting is very difficult at the moment but when these forecasting houses use the media so brazenly to build up their brand they are playing with the economic sentiment in a dangerous and damaging fashion.

I would ask economics journalists to think twice before they mindlessly publish the next round of forecasts they get. Have a look back just a month ago to what the previously forecasts were, they are likely to be so way off that this round of forecasts won't be much better.

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