Suchergebnisse

The Institute periodically reviews the accuracy of its macroeconomic forecasts. Pain et al. (2001) compare the performance of NIESR output forecasts to a naïve forecast that uses a simple rule to predict growth next year. They find that between 1980 and 2000 the National Institute forecast performed better than a naïve, or random walk, forecast in two years out of three. Poulizac et al. (1996) consider a sequence of quarterly economic forecasts published by NIESR between 1982 and 1995 (beginning with that produced in February for the growth of GDP and inflation in the following year and finishing with the forecast produced in November for growth in the current year). They show how the reliability of the Institute's forecast improves as the forecast horizon approaches and conclude that errors to GDP and inflation forecasts are normally distributed. In a similar vein, Mitchell (2005) shows that the Institute's point forecast of inflation is reliable whilst its measure of uncertainty has been exaggerated.

This paper compares the National Institute of Economic and Social Research (NIESR) forecasts for output, inflation and key public sector finance variables against the corresponding forecasts from HM Treasury (HMT), the Bank of England (Bank) and the Institute for Fiscal Studies (IFS). We find that NIESR outperforms, on average, other major bodies in its forecasts for output and in particular inflation where simple scores are used. It also performs well on the forecasting of the government current budget surplus but not public sector net borrowing. Statistical estimates of accuracy provide a less clear picture but their reliability is blighted by the small sample size.

GDP growth slowed below trend in the second half of last year. At the time of writing, before the initial estimates of GDP growth for the fourth quarter of 2004 are released, we estimate that GDP expanded by 0.4 per cent in the final quarter of last year. The weakness in GDP growth reflects in large part the poor performance of industrial production in the second half of last year.

The production of this forecast is supported by the Institute's Corporate Members: Abbey plc, Bank of England, Barclays Bank plc, Ernst and Young LLP, GlaxoSmithKline plc, Marks and Spencer plc, Morgan Stanley Dean Witter (Europe) Ltd, Morley Fund Management, The National Grid Company plc, Nomura Research Institute Europe Ltd, Rio Tinto plc, Standard Chartered Bank plc, Unilever plc and Watson Wyatt LLP.

We assess the performance of France, Germany and the United Kingdom over the period 1997-2002. Gross and net output per hour worked are considerably lower in the UK than in France and Germany. GDP in France and the UK have grown at the same rates over the period although real national income in the UK has grown considerably faster than in France. Seen from the supply side, French growth is substantially attributable to growth in total factor productivity while in the UK factor inputs are more important. There is, nevertheless, a concern that, at the margin, UK growth may be depreciation-intensive and therefore of poor quality. Germany's growth has been slow because productive inputs have grown only slowly and its weak performance is probably structural rather than cyclical. There does seem to be room for substantial increases in labour input in both France and Germany to be achieved through reform to labour market conditions such as tax rates on low paid workers.

During the second half of the 1990s the UK economy enjoyed a sustained period of strong and stable growth. Since then the slowdown in the world economy that accompanied the collapse in equity markets has served until recently to moderate growth both domestically and abroad. But, in comparison to other major economies, the UK has so far emerged relatively unscathed. This could be the result of good fortune, well directed stabilisation policies or reformed institutions. Part at least of the relatively good growth performance displayed by the UK economy comes from stronger domestic demand. It is of course difficult to disentangle strong demand growth from the impacts on income of improved supply performance. We attempt to isolate those elements that are most clearly demand side stimulants.

When the Labour Party came to power in 1997, it had an agenda for reforming the functioning of the UK economy. It planned to introduce a stability-oriented macroeconomic policy that would enhance growth. It was critical of the high level of borrowing that the previous Government had undertaken, and promised to be more prudent. It wanted to increase participation and employment in the economy as a means of both increasing output and reducing poverty. It also aimed to improve the quality of the labour force by enhancing the educational standard of the population and to close the productivity gap between Britain and other European countries.

Output growth in 2004 was 3.1 per cent, and the preliminary estimate for growth of GDP in the first quarter of 2005 was 0.6 per cent, slightly higher than on our early estimate. Relatively robust growth over the recent past suggests to us that the output gap has now closed, as we can see from chart 2. We anticipate that growth will rise further in the second quarter.