A pinch of salt needed

COMMENT: We live in a disrupted world where President Donald Trump in America is seemingly intent on destroying democracy and European Chief Negotiator for Brexit, Michel Barnier appears to only be able to offer a ‘take it or leave it’ stance when it comes to a so-called hard Brexit, writes Ben Hackett.

Additionally, the Middle East is in a mess with sanctions still being imposed on Qatar and North Korea is a danger to world peace with its continued missile testing programme.

The ‘America First’ movement continues to state that trade should be balanced, but what does the US produce that China or Europe really want in quantities to achieve this? Heavily-subsidised genetically modified agriculture does not produce enough to achieve any sort of balance.

The International Monetary Fund has revised its 2017 forecasts for the UK and the US downward, less than three months after having increased them and UK GDP is now projected to grow by just 1.7%, down from projections of 2%. This is despite 18 months of continuous growth to the end of June. 

The US projections for 2017 and 2018 are 2.1%, a long way from Trump’s 4% promised goal. Three months ago, the IMF said it expected growth in the world’s biggest economy to be 2.3% this year and 2.5% next.

The IMF has also left its global growth forecasts unchanged at 3.5% in 2017 and 3.6% for next year, noting that stronger performance from the Eurozone, China and Japan has been offset by weaker performances elsewhere. 

The IMF revised Germany up by 0.2 points to 1.8%, France by 0.1 points to 1.5%, while Italy and Spain have both been revised up by 0.5 points to 1.3% and 3.1% respectively.

But, how much faith can be put in the numbers? As noted in this column before, economic models and forecasts have proven time and again to be unreliable. Unfortunately, there is now little difference between a simple economic model using trend lines and a complex econometric one when it comes to their mid to long term accuracy. We could go one step further and state that short term forecasts are, frankly, fallacious.

What this economist knows is that a positive mood of the population will bring growth and conversely a pessimistic mood will do the opposite.  Perhaps we should ask the press to publish only good news, even if it is “fake” news.

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