‘It feels like Groundhog Day’

Jillian Thomas: Managing Director of Future Life Wealth Management
Jillian Thomas: Managing Director of Future Life Wealth Management

The different forecasts for UK economic growth coming from a variety of institutions, and the frequency of small percentage changes, is bewildering for many of us.

Clearly, the small percentage point shifts in the economic climate forecast are understood and significant somewhere in the worlds of corporate finance, investment and banking.

What is identified as a double-dip recession for the UK, seems to many of us to be more like a roller-coaster ride in Blackpool.

In the last two months, the Treasury, the CBI, the Bank of England and the OECD have all provided differing figures and commentary, in which we can only assume the small differences are each in turn, significant and influential in the great economic scheme of things.

At the beginning of September, The Organisation for Economic Co-operation and Development (OECD) cut its growth forecast for the UK.

It is expecting the economy to shrink by 0.7 per cent in the third quarter of 2012, before returning to growth of 0.2 per cent in the fourth quarter of the year.

The OECD noted that this forecast did not account for the likely bounce back in activity from Q2 to Q3 following the additional Diamond Jubilee bank holiday in June, or for the impact of the Olympics and the Ryder Cup.

Now, at the end of September, UK GDP growth has been revised slightly upwards to a contraction of 0.4% in Q2, according to the final estimate from the Office of National Statistics.

This is in line with economists’ expectations and compares with an original estimate of a 0.7% contraction and a second estimate of a 0.5% tightening. The Jubilee Bank Holiday weighed on growth during the quarter. The UK remains in the midst of a double-dip recession after the economy contracted by 0.3% in Q1, 2012 and 0.4% in the final quarter of 2011.

Whilst all seem to agree on forecasts that remain gloomy for UK growth for this year and 2013, there is almost something surreal in the number, frequency and promotion in the news of these forecasts.

To an uninformed and increasingly numbed observer, the whole business is beginning to have the feel of the film ‘Groundhog Day’!

*Sources: www.ons.gov.uk, www.icaew.com, www.oecd.org