It’s back to school, economists!

IT’S back to school and back to work. It has been a pretty glum summer too for all sorts of reasons. So what’s ahead for the autumn? On the face of it, the gloom would seem likely to continue. Taking the most recent economic news, we still have falling house prices and a slump in housing transactions.

There is a very weak purchasing managers’ index for manufacturing, suggesting quite a sharp contraction in that chunk of the economy through the rest of this year.

Insolvencies are climbing as higher interest rates bite into company finances.

And, as the chief economist at the Bank of England, Huw Pill, acknowledged last week, there is a danger of damage being done as the Bank keeps pushing up rates.

As far as UK equities are concerned, this depressing mood has shown itself in share prices, with the FTSE 100 index demonstrating the wisdom of the adage that you should sell in May.

Actually, you would have done best to have sold in February, when the Footsie topped 8,000.

And better than getting out in May would have been to get out in April. On the last trading day of that month, April 28, it was roughly 10 per cent higher than it is now.

So there are plenty of reasons for regarding the months ahead with some trepidation.

Yet at a time like this there is always another rather different story. Starting with the UK, the job market remains remarkably strong, much stronger than you would expect given the apparently sluggish growth.

One obvious measure is pay, with the most recent figures showing private sector wages up 8.2 per cent on the year.

Another more forward-looking one is the report from the Chartered Institute of Personnel and

Development, which showed that many more employers expected to increase staff over the coming three months than sought to downsize their workforce.

More than 40 per cent had hardto-fill vacancies.

Or take the housing market. It is soft, of course, but while those Nationwide Building Society figures showed prices down 5.3 per cent from their peak in August a year ago, they are still higher than they were at the beginning of 2022.

We have shaved off the peak, which unless you happened to buy last summer, is surely welcome. But this is not a crash. Stable prices and a big increase in wages is exactly what is needed to make homes more affordable.

Indeed, as readers may recall, I have long been sceptical about the story of the country experiencing very slow growth.

The International Monetary Fund, which has form for underestimating the resilience of the UK economy, has had to revise up its dire prognostications.

And just on Friday the Office for

National Statistics suddenly found that the UK, far from being the only major economy to be smaller than it was pre-pandemic, is actually quite a bit larger.

It has discovered that the economy is nearly 2 per cent bigger than it had previously reported. In particular, we have done much better than Germany.

It is nice to be vindicated and makes all those disagreeable comments about the UK’s poor performance look pretty stupid.

The performance hasn’t been brilliant, but it hasn’t been dreadful. I can’t help feeling a sense of despair at these clever economists who have so little intuitive feel for how the UK economy works.

If tax receipts and the labour market are booming, the economy must be growing reasonably well. I expect in the months ahead the growth numbers will be revised up further.

What about the autumn? Until the markets get a clear sniff that global interest rates are on the way down things will continue to feel grumpy.

It doesn’t really matter much whether the Bank of England does one more rise in rates or not. I think it should stick where it is, but the more important thing is to start getting rates down as soon as possible.

In any case, we are prisoners of a global movement, which will be led by the US Federal Reserve.

What we do know is that at some stage quite soon the central banks will all start cutting rates.

Quite soon inflation everywhere will be down at about 3 per cent.

Getting used to inflation no longer being a social and economic catastrophe will be almost as big a shift as the experience we have had over the past two years – and a vastly more agreeable one.

These clever folk have little feel for how the UK operates