Predicting recessions - a mugs game

There was a lot of noise about yesterday’s (provisional) GDP data with national output up 0.8% in the 3rd quarter double the city consensus. Plenty of noise yes but not much substance. This data is an early estimate and will almost certainly be revised in the months ahead. What we are seeing is a fairly standard rebound from a deep recession and it cannot be unexpected given the scale of the fiscal and monetary stimulus imparted on the British economy since recession hit us in late 2008-early 2009! On these occasions it is best to switch off the rolling news channels and think about some more interesting macroeconomics than the GDP stats!

Two members of the Bank of England have made important comments in the last couple of days. First Mervyn King was highly critical of the approach to risks taken by the banking system in the run up to the global financial crisis and hinted at support for structural reforms. Secondly Charlie Bean (Chief Economist) has given a talk to the Royal Statistics Society about the difficulties in making accurate macroeconomic forecasts - reported here in the Telegraph. There is quite a lot in what he says about the inherent problems in forecasting short term movements in prices, output and jobs. There are some good evaluation points in here for A2 macroeconomists.