Is everyone too gloomy about the world economy, and indeed the British one too? After a tumultuous week, with the US coming to terms with a shift in economic policy (and much more) and the UK counting the potential cost of Brexit, this should be a week for reflection. Second thoughts are usually better than first ones.
As far as the UK is concerned, the most interesting thing to look for will be how the economic forecasts for 2017 are shaping up. The official view, that of both the Bank of England and the Office for Budget Responsibility, is that growth will be around 1.4 per cent. The OBR took some stick for that last week, unfairly because the whole point of having an independent office is that it should be independent of political pressure, and it was doing just that. In any case that forecast was at the top end of the present expected scale.
The question now is whether other forecasters will start to revise their forecasts upwards, given the loosening of policy in the US (which should, in the short term, boost growth there). At the margin that should benefit the UK. A bigger influence, however, will be a more general rethinking of the behaviour of UK consumers, which have kept the economy growing solidly though the second half of this year. If they keep going next year, maybe growth forecasts should be revised up for 2017, just as they have for 2016. We should start to see the new private sector forecasts for 2017 starting to come through in the next few days.
Next, there are some purchasing managers’ indices or PMIs, coming out this week. These, you will remember, give an indication of the optimism/pessimism of the business community and hence of future growth. On Thursday we get the UK ones for manufacturing and on Friday for construction. We have to wait until the following Monday for the all-important services sector. Expect a gradual, cautious recovery. But – more important – on Thursday we get world-wide PMIs for manufacturing. That will tell us about the world, which is of course matters vastly more. Global recession next year? Not if global PMIs remain positive.
The Italian referendum and what else to look out for in the economy this week | The Independent
As far as the UK is concerned, the most interesting thing to look for will be how the economic forecasts for 2017 are shaping up. The official view, that of both the Bank of England and the Office for Budget Responsibility, is that growth will be around 1.4 per cent. The OBR took some stick for that last week, unfairly because the whole point of having an independent office is that it should be independent of political pressure, and it was doing just that. In any case that forecast was at the top end of the present expected scale.
The question now is whether other forecasters will start to revise their forecasts upwards, given the loosening of policy in the US (which should, in the short term, boost growth there). At the margin that should benefit the UK. A bigger influence, however, will be a more general rethinking of the behaviour of UK consumers, which have kept the economy growing solidly though the second half of this year. If they keep going next year, maybe growth forecasts should be revised up for 2017, just as they have for 2016. We should start to see the new private sector forecasts for 2017 starting to come through in the next few days.
Next, there are some purchasing managers’ indices or PMIs, coming out this week. These, you will remember, give an indication of the optimism/pessimism of the business community and hence of future growth. On Thursday we get the UK ones for manufacturing and on Friday for construction. We have to wait until the following Monday for the all-important services sector. Expect a gradual, cautious recovery. But – more important – on Thursday we get world-wide PMIs for manufacturing. That will tell us about the world, which is of course matters vastly more. Global recession next year? Not if global PMIs remain positive.
The Italian referendum and what else to look out for in the economy this week | The Independent
