The Confederation of British Industry has a credibility problem. I wish it would just shut up.
“We continue to expect UK economic growth to strengthen and become more broad-based over this year and next,” said Stephen Gifford, the CBI’s director of economics earlier today as, for the 27th time over the last three years, an alleged authority figure came out of the silo to tell us everything is going to be alright really, no – really.
Mr Gifford didn’t quantify exactly how long he’d been continuing to expect, so let me offer a view as to what valuation we should put on this latest CBI forecast.
Late in 2011, an upbeat CBI said the UK economy would return to growth in 2012 at the level of 0.9%. It then downgraded that forecast to 0.6%. In fact, 2012 was economically flat, with a drop of 0.3% in Q4. But at the end of 2012, the CBI said we would return to “modest growth” in 2013. In the first quarter of 2013, growth was confirmed at 0.3%, which is very modest indeed. Taking the last two quarters in fact, it is still flat….and only just avoided a third dip into recession.
I’ve no desire to be Job for the sake of it, so I will restrict myself on this occasion to asking on what exactly the CBI bases its forecast of modest growth in 2013. Our biggest trading partner is the EU, the southern half of which is showing steep declines in the ability to consume any goods – British or otherwise. The ECB has now cut to negative real interest rates in a final despairing bid to get things moving. 50% of all forecasters predict at best a flat year for the EU.
So where is this UK growth coming from?
Once again in Q1 2013, the UK’s face was saved by services performance. As to selling things we make, the situation is worse than ever: the ONS noted recently that services contributed 0.47% to the 0.3% increase in GDP…a polite way of saying manufacturing went backwards. In fact, the non-services output would’ve looked worse still had it not been for energy output rising a lot due to the cold winter.
All of this smacks of a desperate CBI trying to rally the dejected troops. Its been consistently wrong for nearly 27 months, and has in turn regularly underestimated the seriousness of both the eurozone slump, and the Pound’s exposure to market nerves as the year progresses with Britain getting further and further away from controlling its debt pile.
We have structural problems of deficit growth and economic overdependence on financial services. I’m sure the CBI means well, but emitting optimism at this stage of the game is spin-bollocks of the worst possible kind.