Another shocker on the way for UK growth?

July 25, 2011

Could British economic growth figures for the second quarter mark another shocker for bank economists?

After the 0.5 percent contraction in the fourth quarter of last year that no-one foresaw, we remarked that economists seemed loath to spoil the party by predicting a negative figure.

Although some economic data did hint that a slight downturn was on the cards, no-one then was willing to stick their neck out and predict a contraction. In the end, the 0.5 percent quarter-on-quarter decline was a whole percentage point off the consensus for a 0.5 percent expansion.

Perhaps burnt by this past experience, economists are showing less trepidation about forecasting a negative figure for preliminary British economic growth in the second quarter, due on Tuesday. A Reuters poll ten days ago put the chance of a decline at 20 percent, although several economists now reckon it is much higher.

This preliminary UK reading is always closely watched because it provides the first snapshot of economic performance from a major Western economy.

While the consensus from Friday’s Reuters poll of 42 economists showed expectations for 0.2 percent quarter-on-quarter growth for Q2, four of them – all based in Britain – expect to see a negative figure, with another four expecting zero growth.

On the other side, there is a clutch of analysts who expect growth of 0.4 percent or better. That’s a wide range of views by anyone’s standards, all the more remarkable when you consider they are being asked to predict a lagging indicator that shows what has already happened between March and June – to say nothing of predicting the future.

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