Is recession looming?

[Nimrod103]

His biggest claim to fame seems to be his prediction the demise of Apple via the iPhone.

I think it is quite likely that macroeconomists are not good at running a business or recognizing a business opportunity, and vice versa.
Do you think that Andrew Bailey could ever have been an entrepreneur? Would you want your economy run by the likes of Richard Branson?

[dealtn]

The BoE/MPC is clearly unfit for purpose given their abysmal track record and the madness that was QE. There is no accountability, no sense of direction and the markets are not exactly enamoured by them. The UK needs to incentivise and promote growth. It is the only sustainable way to improve the economy - for everyone - but I cannot see anyone at the BoE or within government who has the faintest idea of how to achieve it.

Both the BoE and MPC have scrutiny and accountability which is backed by parlaimantary legislation.

Their forecast track record isn't out of line with other professional economic forecasters.

The BoE, and certainly the MPC, doesn't have a growth mandate against which that judgement of growth promotion can be made.

[vand]

The BoE/MPC is clearly unfit for purpose given their abysmal track record and the madness that was QE. There is no accountability, no sense of direction and the markets are not exactly enamoured by them. The UK needs to incentivise and promote growth. It is the only sustainable way to improve the economy - for everyone - but I cannot see anyone at the BoE or within government who has the faintest idea of how to achieve it.

Both the BoE and MPC have scrutiny and accountability which is backed by parlaimantary legislation.

Their forecast track record isn't out of line with other professional economic forecasters.

The BoE, and certainly the MPC, doesn't have a growth mandate against which that judgement of growth promotion can be made.

Actually they do.


"We also support the Government’s other economic aims for growth and employment. Sometimes, in the short term, we need to balance our target of low inflation with supporting economic growth and jobs"

They have failed miserably at controlling inflation by leaving rates too low for too long. They are about to compound their mistake by leaving rates too high to save face for their first mistake and therefore fail miserably at their "support growth" mandate, and when that eventually causes a recession and job losses they will have them failed at the "support employment" mandate also.

[Oggy]

Both the BoE and MPC have scrutiny and accountability which is backed by parlaimantary legislation.

Their forecast track record isn't out of line with other professional economic forecasters.

The BoE, and certainly the MPC, doesn't have a growth mandate against which that judgement of growth promotion can be made.

The BoE is owned by HMG and is accountable to them. If you seriously believe a Treasury committee made up of politicians who know very little about anything let alone how to manage the economy is a robust mechanism for scrutinising and holding the BoE to account, then with respect, you are living in dreamland.

Comparing the BoE with other equally lamentable forecasters is fatuous. The BoE got their inflation forecast badly wrong very recently, and their forecasting over the past 20 odd years has been well wide of the mark. So much so, that it even woke up the normally comatose politicians who moaned about it in the summer. The BoE admitted their shortcomings and are conducting an internal review to "try and understand why we have made (forecasting) errors" Things must be bad if even dozy politicians can find holes in BoE forecasting.

Vand addressed the last point. You really have to question whether the BoE does more harm than good.

[GoSeigen]

Forecasts are trailing indicators and should be judged on that basis. Do not use them as any indication of the future. They are pretty good at saying what happened a month or two ago.

GS

[Nimrod103]

Forecasts are trailing indicators and should be judged on that basis. Do not use them as any indication of the future. They are pretty good at saying what happened a month or two ago.

GS

How can one plan for the future without accurate forecasts?

[GoSeigen]

Forecasts are trailing indicators and should be judged on that basis. Do not use them as any indication of the future. They are pretty good at saying what happened a month or two ago.

GS

How can one plan for the future without accurate forecasts?

Can you show us any series of accurate forecasts?



The question reveals a different concept of planning to mine. IMO the idea of planning is not to produce a foolproof plan from accurate forecasts. It is to use a combination of unreliable forecasts along with skill, intuition etc to formulate a sensible plan against which progress will be measured as the actual outcomes become known. The plan can then be adjusted to new realities.

Investing needs to follow a similar process. You cannot rely on so-called forecasts. Mostly they are extrapolations from what is currently known, so as I have noted they simply tell you what has happened in the past. Therefore as investors we need to use our skills, judgement and intuition to make our investing plan, but also have the flexibility to adjust if the future turns out not as expected.


GS

[Howard]

Forecasts are trailing indicators and should be judged on that basis. Do not use them as any indication of the future. They are pretty good at saying what happened a month or two ago.

GS

How can one plan for the future without accurate forecasts?

Throughout many years of investing experience I have worked on the basis that there are no accurate financial forecasts. The solution was a widely diversified portfolio.

So many, alleged, experts make forecasts which prove wide of the mark. I'm tempted to ask confident forecasters if they can tell me what the NASDAQ and the FTSE 100 will be in a month, or next week? And forecasting inflation or a recession appears to be too difficult across the world.

In the past I reluctantly had to make strategic plans for a business operation. Scenario planning proved more useful as it covered a number of possible outcomes.

regards

Howard

[Tedx]

If you were that good at forecasting financial outcomes would you be working for someone producing financial forecasts?

[Dod101]

Forecasts are trailing indicators and should be judged on that basis. Do not use them as any indication of the future. They are pretty good at saying what happened a month or two ago.

GS

How can one plan for the future without accurate forecasts?

There is no such thing as an accurate forecast, in my experience anyway. What we used to do would be to assess what we saw as a trend and within that look at the best and worst outcomes and plan accordingly.

Dod

[Tedx]

Boxing Day shopping footfall down 22% (Sky News)

Changing habits .....poor weather and of course, no money.

[vand]

There are plenty of economic forecasts that are broadly correct - the problem is that the market has already orientated itself that way anyway, so there is no payoff in being right.

You either need to go against a consensus and be right and also consistently right. This is not an easy thing to do.

2023 is a good example - markets were broadly expecting a mild recession and had price themselves as such. Personally I am always skeptical of consensus forecasts, and I thought that we would either avoid recession altogether or have a very bad recession, with the former the most likely outcome.. which is what has happened. Therefore it paid to be long on equities and risky assets.

For 2024 I think consensus forecasts are far too optimistic:
https://insight.factset.com/sp-500-cy-2 ... ngs-growth

analysts expect earnings to recover and accelerate throughout the year, with above long term average earnings growth of 11.8% and near record profit margins. Maybe that will be accurate, but I personally think companies will have a harder time making money. Therefore, imo, the risk/reward is not very favourable and more caution is warranted. Again, some of this is based on my own experiences where I know as fact that management has had to internally revise revenue forecast down such is the state of business.

As a comparison:
2024 forecasts vs 2023 provisional numbers

Earnings growth 11.8% vs 0.6%
Revenue growth 5.5% vs 2.3%
Profit margin: 12.3% vs 11.6%

[gryffron]

Boxing Day shopping footfall down 22% (Sky News)
Changing habits .....poor weather and of course, no money.

And several of the bigger chains decided to stay shut and give their staff the bank holiday.

Gryff

[Tedx]

Boxing Day shopping footfall down 22% (Sky News)
Changing habits .....poor weather and of course, no money.

And several of the bigger chains decided to stay shut and give their staff the bank holiday.

Gryff

That would do it.

Dunno why Sky bothered reporting that figure really. It's completely irrelevant

[vand]

And several of the bigger chains decided to stay shut and give their staff the bank holiday.

Gryff

That would do it.

Dunno why Sky bothered reporting that figure really. It's completely irrelevant

It's not irrelevant at all - albeit it's a single and incomplete datapoint. It does highlight how a contraction in activity feeds on itself. As fewer people shop, fewer shops feel the need to be open, so their workers get the day off but they don't get paid either so there's less money going around, hence fewer shoppers, hence less need for shops to be open... hence....

[Oggy]

The greatest problem by far facing the economies of the UK and much of the Western world is the people's touching belief in socialism. It is presented as a nice, compassionate idea and therefore appeals to many folk and governments - especially in the UK where all main political parties are socialist to varying degrees. However, socialism is an ideal, a fantasy, a belief, a will o the wisp. It is neither practical nor realistic, has been tried many times and has failed. Simply put, there is no such thing as a free lunch. As long as economies are run on socialist principles they will eventually run out of money, build up a colossal (and usually unsustainable) debt, and worse of all, impoverish the most vulnerable and the poorest in our society - the very people it was meant to help.

Socialism is one of greatest con-tricks ever played on mankind. As long as folk continue to believe in it, economies will continue to be built on sand and pipe dreams, neither of which is any basis for credible financial stewardship.

[ursaminortaur]

The greatest problem by far facing the economies of the UK and much of the Western world is the people's touching belief in socialism. It is presented as a nice, compassionate idea and therefore appeals to many folk and governments - especially in the UK where all main political parties are socialist to varying degrees. However, socialism is an ideal, a fantasy, a belief, a will o the wisp. It is neither practical nor realistic, has been tried many times and has failed. Simply put, there is no such thing as a free lunch. As long as economies are run on socialist principles they will eventually run out of money, build up a colossal (and usually unsustainable) debt, and worse of all, impoverish the most vulnerable and the poorest in our society - the very people it was meant to help.

Socialism is one of greatest con-tricks ever played on mankind. As long as folk continue to believe in it, economies will continue to be built on sand and pipe dreams, neither of which is any basis for credible financial stewardship.

You mean "build up a colossal debt" like that mecca of socialism the USA ?

[Steveam]

Those in power (of all persuasions) are tempted to bribe to stay in power. This is a particular problem in “democracies” but is also evident in some other types of government. They, those in power, find it easy to buildup debt and/or devalue fiat currencies rather than tackle underlying problems.

Best wishes,

Steve

[Nimrod103]

Those in power (of all persuasions) are tempted to bribe to stay in power. This is a particular problem in “democracies” but is also evident in some other types of government. They, those in power, find it easy to buildup debt and/or devalue fiat currencies rather than tackle underlying problems.

Best wishes,

Steve

There is a limit to the amount of debt which countries can build up, and many western countries including the USA are now approaching it. It will be interesting and not a little nerve wracking to see how much more debt we can take on.

Without recourse to further debt, governments can only bribe the electorate by paying Peter (their supporters) by taxing Paul (their ideological enemies).

[funduffer]

Those in power (of all persuasions) are tempted to bribe to stay in power. This is a particular problem in “democracies” but is also evident in some other types of government. They, those in power, find it easy to buildup debt and/or devalue fiat currencies rather than tackle underlying problems.

Best wishes,

Steve

There is a limit to the amount of debt which countries can build up, and many western countries including the USA are now approaching it. It will be interesting and not a little nerve wracking to see how much more debt we can take on.

Without recourse to further debt, governments can only bribe the electorate by paying Peter (their supporters) by taxing Paul (their ideological enemies).

Debt as a % of GDP - USA 110%, Japan 214%, so USA nowhere near any limit.

If you want the main influences on GDP growth - then they are, in my opinion low birthrate/increasing longevity, climate change and inequality.

Low birthrate can be fixed by increasing immigration - as Japan are finding out

Climate change will need public investment, particularly in renewables, which improve energy self-sufficiency. Food security will become a problem and UK is in a poor position.

Inequality can be fixed by progressive taxation policies - call it socialism if you like. Too much wealth in the hands of the few will lead to civil strife and does nothing to promote growth. Trickle down has never worked.

FD