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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (17381)	12/2/2004 11:02:21 AM
From: zonder	Read Replies (1) \| Respond to of 116555

Gordon Brown in his pre-budget statement today delivered a predictable with one eye on the likely May 2005 general election. The single most important forecast assumption (given the sensitivity to public deficits to even small changes in economic output) is the GDP forecast for next year. In March of this year, he forecast 2005 GDP at 3.0% to 3.5%. Despite the fact that almost all forecasters have revised down their forecasts for UK growth in 2005 down over that period, Brown's new November forecast is unchanged at 3.0% to 3.5%. Is this realistic? Brown's Treasury website contains a very comprehensive consensus forecast for the UK economy which covers the forecasts of 39 independent forecasters. The average independent forecast for GDP is 2.5% - the OECD and other major forecasters have come to a prognosis similar to this independent consensus. The Chancellor's central forecast mid-point (3.25%) then is a very substantial 0.75% higher than that of independent forecasters. Conclusions: The November statement by Brown is a piece of carefully constructed pre-election over-optimism. If Labour win the 2005 election, a tightening of fiscal policy is highly likely. If Brown remains Chancellor, this is likely to be achieved by higher taxation. This will add to the downward pressure on the economic growth momentum and render totally implausible his current forecasts for GDP in both 2005 and 2006.