Much ado about little

Depending on which report you read, the CBI's latest economic forecast is "gloomier than the Chancellor's", "sharply below the level Chancellor Alistair Darling forecast" or a "challenge" to the Chancellor.
The truth, though is more mundane. This table shows the quarterly GDP growth forecast by the CBI and Chancellor, based upon my interpolation of the mid-point of the Treasury's range (pdf) and the CBI's profile of annual growth.
You can see that both agree upon  two things - that growth will be weak in the first half of this year, and that it'll return to around trend by late 2009.
The disagreement is simply about when the up-turn will come.
And even this is small. The 0.2 percentage point difference between the  forecasts for Q3 and Q4 is less than the average revision in official estimates of quarterly GDP growth between the initial release and the latest numbers. This means it's quite possible that reports this time next year will vindicate the CBI and yet later revisions will vindicate the Chancellor (or vice versa). It'll be years before we know who's right.
What's more, of course, forecasts are subject to a big margin of error; the Treasury estimates its average error to be 0.5 percentage points for its 2009 forecast of 2.5% growth; the CBI's average error will be about the same. 
Both forecasts, then, are consistent with GDP growing around 2% for a while.
How dull is that?

Comments

[Bruce]

The Chancellor's growth rate forecast is over a quarter higher than the CBI's for 2009. When growth is dribbling along at the 2% mark, that could be the difference between "dull" and painful in places.

[dearieme]

If we are entering the Greater Depression, both will look like Charlies. Presumably it is such a prospect that is animating the Fed.

[jameshigham]

Except for the worsening sub-prime and the political moves due in early 2009.

[Glenn (aka angry economist)]

ah 0.2% difference... its nowt much really.

economic forecasts - gotta love 'em. Its a projection, ain't it and the margin of error is pretty much unkown, but of the order of 1% usually.

in those years when we will be waiting to see who is right, data revisions and new information will lead to a recalculation of estimates etc etc.

And the focus is all on headline GDP. What really matters is how different parts of the economy and of the country perform.

I find that the CBI usually talks pish about a lot of things. Just what percentage of employers does it represent? not many.