Economic forecasting, that art of the impossible, is more aptly called nowcasting. As recent about-turns should remind us, economic predictions are better guides to current perceptions than to future outcomes. The public is advised to learn to love uncertainty.
In the past 10 days, both the Organisation for Economic Co-operation and Development and the European Commission have issued updated economic forecasts. Like everybody else, they were wrong-footed by Europe’s strong growth in the second quarter, powered by Germany’s roaring 2.2 per cent quarterly rate and a respectable 1.2 per cent rate in the UK. Yet they drew quite opposite lessons. The OECD lowered its predictions for the autumn, presumably thinking the economic fuel had run out. In contrast, Brussels expects “some momentum . . . to feed through” and nudged its expectations up.
The result are predictions so wide apart that at least one of the two august institutions will soon be proved quite mistaken. The divergence is particularly arresting for the core euro countries – especially as we are well into the forecast period. In the third quarter, the OECD thinks France and Germany are adding only 0.2 per cent to output – and it expects Italy to shrink slightly. The Commission’s rosier forecast has all three press ahead by around half a percent.