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Even economists find reasons to be cheerful as Britain set for Spring splurge

Simon English
·3-min read
<p>Chancellor Sunak has reasons to be cheerful</p> (PA Wire)

Chancellor Sunak has reasons to be cheerful

(PA Wire)

So the economy only grew by 0.4% in February, that’s not very good is it?

It’s better than it sounds, a small number which means quite a lot. It’s about £10 billion added to the economy in straight money terms, but more important is the direction of travel.

The January figure was revised upwards from -2.9 to -2.2, so we didn’t contract as much as we thought. And in February, even with us all mostly still locked up, the economy started to grow.

Spring boom on the cards then?

A lot of people think so. Virgin Red predicts a £44 billion two-week April spending splurge as we splash out with the money we have saved in lockdown.

Even dour economists have started to make concessions to optimism. And begun to admit previous forecasts were too bearish.

Phil Shaw at Investec wrote today: “Together with January’s revisions, the level of GDP in February is +0.6% higher than our estimates. Moreover the series of upward monthly changes to 2020, outlined in the Quarterly National Accounts release a couple of weeks ago, were confirmed. Our GDP forecast for 2021 is currently +7.3%, but factoring in both sets of revisions and keeping our forward profile unchanged would lift this by around one percentage point.”

So 8% growth this year is on?

It could be. Certainly, the economy is bouncing back quicker than previously thought, giving hope to businesses around the country that they can survive Covid.

Paul Craig at Quilter Investors said:

“After an extremely challenging year for the economy, culminating in a 10% knock to GDP over the course of 2020, the first signs of an economic recovery in February are enormously welcome. First of all, and despite all manner of headlines since March 2020 proclaiming that many businesses will collapse…this hasn’t materialised in a major way.”

The International Monetary Fund (IMF) expects the UK to post 5.3% growth in 2021, and 5.1% in 2022. This would make the UK the fastest-growing G7 country.

Ulas Akincilar, at the online trading provider, INFINOX, says:

“The bounceback is on. While many had hoped for a faster rate of growth, UK output expanded in February, and as lockdown restrictions continue to ease across the country, there’s an increasing sense of the shackles coming off the economy.”

Are economists too pessimistic in general?

Well, the dismal science has lately been doing little to live down its reputation. Namely that it is a bunch of pointy heads forever looking backwards, finding reasons not to be cheerful and then forecasting pain.

With honourable exceptions -- Capital Economics has had a good crisis – expert predictions of what official figures would show on output, GDP, consumer sentiment and much else have routinely shown to be unduly negative.

The assumption has always been that since we are in a hole, it would only get deeper.

Actually, economically and in other ways, we have reminded ourselves that we are a more resilient nation than we usually give ourselves credit for.

It looks like the economics profession has underestimated the ability of businesses and households to adapt, and moreover to just keep going, if only out of necessity.

This isn’t to downplay the very real pain suffered in the last year by, well, all of us one way or another.

But it does feel that the economists play to our worst instincts, our national inclination to see only the dark side of financial forces.

Cheer up lads. Really, it might never happen.

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