Hurrah! An optimistic economic forecast proves to be correct

There is no shame in admitting the improbability that any given forecast will be right (though against the odds it can happen) and I’d argue strongly that there is no shame in allowing one’s view to evolve as new evidence, or new thinking, requires. But the process has to be honest and transparent.

Readers with awesome memories will know that by early 2011 I was cautiously suggesting that we had seen the worst and that the economy would start a slow, faltering but sustained recovery. This wasn’t a universal view but it did happen to be shared by the Bank of England and the Treasury – which I guess should have told me something.

In the interests of that allimportant transparency I have returned to this central macroeconomic theme time and again; depressingly it has routinely been to recognise that for all sorts of reasons – often genuinely unpredictable – reality was lagging far behind expectations..

I pushed my luck by focusing on the economic outlook once again when writing this column at the turn of the year; at risk of sounding like the proverbial scratched record I ventured the view that 2013 would see the early stages of recovery that I had originally heralded for 2011. Given past performance, you could be forgiven for expecting that around about now I would be starting to back-pedal and readying the now familiar explanations for why. But I’m not going to.

First quarter growth of 0.3 per cent was pretty dismal but justified cracking open the bubbly when set against all those forecasts of “triple dip” recession. Growth was largely driven by services but construction was – remember – drowning in incessant rain. Manufacturing disappointed and may still do so while the eurozone is such a mess.

But it all had more of a “business as usual” feel than we have had for a long time. Equity markets have been strong; generally this presages stronger real activity. Energy prices have fallen, albeit not far enough. For the first time since the crisis began the Bank of England has raised its forecasts.

Putting out an optimistic piece last December felt pretty brave to me, so it is a great relief, for a change, to be able almost half a year later to be able to say I stand by it.