- Official forecasts are bound by forecasting conventions and strict publication timetables. Can market indicators offer a clearer perspective?
- Lipstick sales, men's underwear and skyscrapers have all been used as recession indicators in the past
It can sometimes feel as though economic forecasts make the outlook foggier. The Bank of England’s (BoE) monetary policy report was a bumper 93 pages long and contained two alternative forecasts for the UK economy – both based on interest rates that the Bank warned were unrealistic. Meanwhile, Office for Budget Responsibility (OBR) projections released with last month's Autumn Statement warned of high uncertainty and the outsize impact of movements in energy prices and interest rates.
Part of the problem is that many of the factors shaping the UK’s economic fate are almost unforecastable: think developments related to the conflict in Ukraine, the emergence of a new Covid variant or a further energy price shock. The OBR and BoE are also constrained by rigid publication timetables and forecasting conventions. The BoE had to release its latest report on 3 November, with the caveat that “the MPC’s forecast does not incorporate any further measures that may be announced at the Autumn Statement”. The government’s fiscal tightening two weeks later meant that the Bank’s carefully produced forecasts were quickly out of date.