Week 2, 2012: UK GDP Forecasts

Summary: Yesterday the National Institute of Economic and Social Research (NIESR) released their GDP forecast for the final quarter of 2011. It is basically in line with the outcome of our survey, but both are more positive than the average of the predictions given by the three professors at the ERC Clash of the Titans event.

What does the chart show? The red line shows the percentage change of Gross Domestic Product (GDP) from one quarter to the next, as reported by the Office for National Statistics. This is considered the official measure of the output of the UK economy. The yellow, green and blue lines represent three different predictions for what happened in the final quarter of 2011, as given by the NIESR, the ERC survey, and the professors at the Clash of the Titans event respectively.

Why is the chart interesting? The NIESR forecasts are generally accurate to within 0.1-0.2 percentage points, and so their prediction of a 0.1% increase in GDP last quarter is very much along the same lines as the 0% prediction from the ERC survey of over 200 economists, academics and business leaders.

Although the average forecast from the three professors at last month's Clash of the Titans event was for a 0.4% decrease in GDP, Professor Hashem Pesaran from Cambridge actually gave the same prediction as the NIESR: a 0.1% increase. Bringing the average down were the more pessimistic views of Prof John Muellbauer (Oxford, -0.3%) and Prof Danny Quah (LSE, -1%).

Our survey predicted that UK GDP would shrink in the first quarter of 2012, before growing back again later in the year. The official preliminary estimate for Q4 2011 GDP is due to be released by the ONS on the 25th January.