Grim economic news II: OECD cut UK growth prediction. Again

Alex Hern follows up yesterday’s economics round-up with another day of bad news. This time the OECD and Fitch have joined in, both predicting a slow-down.

 

There’s not going to be much christmas cheer in number 11 today, as the OECD has cut its growth prediction for the UK for the eighth month running.

This follows the news yesterday that economists at the bank Standard Chartered were prediction a contraction of 1.3 per cent of GDP in the first half of 2012, and comes on the same day that the ratings agency Fitch downgraded UK forecasts from 1.2 per cent growth to just 0.7 per cent.

Rather than making concrete predictions about the magnitude of growth, the OECD uses an index of “composite leading indicators” (CLI), which tend to exhibit trends around six months in advance of the economy moving in the same direction.

A CLI of over 100 implies that growth will rise above the long-term trend, and under 100 means that it will drop below. The further above or below 100 it is, the surer that rise or fall is to happen. Since the long-term trend is itself so low, there’s not far for growth to drop before it becomes contraction, and the numbers aren’t looking so good.

The OECD area as a whole has a CLI of 100.1, and the eurozone is on 98.5. Alarmingly, the UK is just a tenth of a point above the eurozone indicator, at 98.6, which implies that our fiscal isolation hasn’t kept us much safer that the extremely exposed economies of France (98.1) and Germany (98.3).

The compilation of the OECD’s figures is likely too early to fully take into account the effects of Cameron’s not-quite-veto on Friday. For that, we shall have to wait until the release of the January index.

As we reported yesterday, any further cut in predicted growth will have large ramifications.

Even the official figures, which still predict some growth, were bad enough to require an admission in the autumn statement that the deficit would not be cut in the lifetime of this parliament.

Under the 2010 OBR projection, the deficit would have shrunk to £37 billion by 2014/15, but by the 2011 projection, it will still be £79 billion – and this is a projection which still assumes uninterrupted growth, rising to almost three per cent by 2014.

If the UK really does go back into recession between now and then, and if it does stagnate as much as is predicted in the aftermath, the prudence of deficit reduction as a primary aim may have to be called into question.

The one piece of good economic news today is that the rate of inflation appears to be falling from its highs in October, as Tony Dolphin reports below. As christmas presents go, however, Osborne may be feeling hard done by.

See also:

Inflation starts to head lower (probably)Tony Dolphin, December 13th 2011

OBR confirm Osborne will borrow more than the Darling projectionDaniel Elton, November 29th 2011

Whatever Osborne’s growth forecasts today, the reality is probably worseDaniel Elton, November 29th 2011

Inflation report is bad news for Osborne’s targetsTony Dolphin, October 18th 2011

Cameron’s “failed experiment” leads to yet another economic downgradeAlex Hern, October 17th 2011

Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.

21 Responses to “Grim economic news II: OECD cut UK growth prediction. Again”

  1. Patrick Osgood

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  2. Alf Oldman

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  3. J P Harrison

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  4. Alex Braithwaite

    RT @leftfootfwd: Grim economic news II: http://t.co/EKzfyHD2

  5. William Bain

    RT @leftfootfwd: Grim economic news II: http://t.co/0Hoos5yA

  6. Kevin Leonard

    OK so here’s a radical thought for you all to mull over during Christmas.
    How about getting out of Europe and using just half the subscriptions currently running @£50million a day to finance youth enterprise schemes such as apprenticeships whilst also setting up a loan fund to allow businesses to lend directly from government to enhance their business and create more jobs.
    The bankers have had things far too easy as they have been “GIVEN” X billions in quantitative easing to shore up their bonus pots lets now call in the debts or at least re-negotiate the terms of interest.
    Give every British born household £10,000 January bonus to with as they wish which will stimulate the economy whilst driving down some of the personal debt meaning bankers will have to work a little bit harder to get their money.
    Raise the tax threshold to £12,000 PA and lower the maximum to 40% I know a lot of you will say but that gives the rich more money “SO WHAT!” all attempts at getting this coalition condemnation to re-distribute the share of the burden will fall on deaf ears as “THEY” are all in it together.
    Give us back democracy by removing the vile corruption yoke of the EU whose desire for a federalist state of Europe has been driven ever faster by the actions of Cameron anyway.

  7. Political Planet

    Grim economic news II: OECD cut UK growth prediction. Again: Alex Hern follows up yesterday’s economics round-up… http://t.co/nglVL6oh

  8. Richard Allen

    simple way out of this, take away the ability of banks to create money. A government shouldn’t have to borrow its own money http://www.positivemoney.org.uk

  9. Juan Voet

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  10. Lisa Sprince

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  11. Noxi

    RT @leftfootfwd: Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/QFqbilgL – @AlexHern reports

  12. Richard Exell

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  13. Rowland Paul Hill

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  14. Michael

    Grim economic news II: OECD cut UK growth prediction. Again l Alex Hern – http://t.co/B6jK1ptA

  15. Panda

    Grim economic news II: OECD cut UK growth prediction. Again: http://t.co/vL4g6fsH – @AlexHern reports

  16. Jeni Parsons

    RT @leftfootfwd: Grim economic news II: OECD cut UK growth prediction. Again http://t.co/OVX1q7Mc #otmp #occupylondon

  17. Nicholas Ripley

    RT @havantacluOTMP: RT @leftfootfwd: Grim economic news II: OECD cut UK growth prediction. Again http://t.co/rXEN26m0 #otmp #occupybrum

  18. Grim economic week: 128,000 more people jobless at Christmas | Left Foot Forward

    […] also: • Grim economic news II: OECD cut UK growth prediction. Again – Alex Hern, December 13th […]

  19. Unemployment: Plan A isn’t working | Left Foot Forward

    […] Grim economic news II: OECD cut UK growth prediction. Again – Alex Hern, December 13th […]

  20. Manufacturers still fear a double-dip recession in 2012 | Left Foot Forward

    […] also: • Grim economic news II: OECD cut UK growth prediction. Again – Alex Hern, December 13th […]

  21. Glasman is battling over postage stamps, but growth is the priority | Left Foot Forward

    […] also: • Grim economic news II: OECD cut UK growth prediction. Again – Alex Hern, December 13th […]

Leave a Reply