Duncan’s Economic Blog

2011 Growth: A Case of Diminishing Expectations

Posted in Uncategorized by duncanseconomicblog on July 8, 2011

Yesterday’s news that NIESR is forecasting growth of only 0.1% in the second quarter reminds us of quite how bad things currently are in the UK. The Sunday’s David Smith has today referred to growing talk in the City that the number may even be negative.

This is all a far cry from the situation only 6 months ago – before the shock decline in Q4 2010 GDP was reported at the end of January.

Whilst there is now a very high chance that overall GDP growth in 2011 may come in at under 1%, only six months ago the average independent forecast was for growth of 2%.

This chart from HM Treasury’s monthly round up of forecasts shows how the picture has developed in recent months. It plots the average forecast for 2011 growth over the past 18 months – since January it has been nose diving.

The questions now are how low will it go? And what will this do to the deficit?

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3 Responses

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  1. jomiku said, on July 8, 2011 at 2:59 pm

    I assume you’ve seen the BIS and IMF papers which say austerity is contractionary unless your economy is expanding enough to offset those effects. Paul Krugman linked to them in the last few days.

    My bet: the “lesson” taken will be doubling down, because when people believe and facts don’t agree they take that as a test of their beliefs, of their will, and they charge forward because their belief says the facts can’t be right.

  2. Paul Newman said, on July 8, 2011 at 10:46 pm

    I cannot say I am surprised it has long been my feeling that far deeper damage was done to the supply side during the Labour period than has yet been understood .

  3. Cahal Moran said, on July 9, 2011 at 10:01 am

    Paul,

    Are you kidding? Exactly what damage was done and where? Do you *actually* think our problems are supply side with 2.5 million unemployed and 500,000 vacancies?


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