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Home > Opinion > Tony Hazell

Take a lesson from Tigger on the economy

Andrew Sentance has attempted to strip out anomalies and reckons the economy could be growing by 1 per cent a year.

By Tony Hazell | Published Aug 29, 2012 | Investments | comments

Have we all become so steeped in economic gloom that we fail to recognise the rays of sunshine that are breaking through?

It is as though Eeyore has leapt from the pages of Winnie the Pooh to take charge of the economy when what we need is a spot of Tigger’s bounce.

I may still be basking in post-Olympic euphoria after being at the athletics stadium to witness the fabulous three – Jessica, Greg and Mo – win gold, but I cannot help feeling that many economic commentators are being a little too negative.

Though I am not suggesting they take a lesson in hyperbole from the athletics commentators.

Take a look at the August Bank of America Merrill Lynch fund manager survey.

This global survey of 173 panelists found that a net 15 per cent expected the world economy to strengthen in the next 12 months.

What is remarkable is that this constitutes a 28 percentage point swing in just one month.

It is, says BoA Merrill Lynch, the largest leap in confidence for more than three years.

Allocations to Europe have risen, though a net 5 per cent still aim to be underweight there.

And there are still fears that corporate profits will continue to fall in the coming year – though fewer now express those fears.

Plenty of economists are scratching their heads over seemingly conflicting data coming from the Office for National Statistics and other sources.

How can 201,000 more people have found jobs in the three months to the end of June while we were supposed to be in a double-dip recession?

Are we really employing more people to produce less? That does not seem likely. Perhaps the figures were distorted by the number of bank holidays and jubilee fever in the spring.

Andrew Sentance seems to think so. The senior economic adviser to PricewaterhouseCoopers and former monetary policy committee member has attempted to strip out these anomalies and reckons the economy could be growing by 1 per cent a year.

All right, it is not much but its better than the zero-growth prospect held out by gloom-maker in chief and Bank of England governor Mervyn King.

And July’s retail sales figures show 0.3 per cent monthly growth and annual growth of 2.8 per cent. On top of this the ONS revised June’s monthly figure up from 0.8 to 1 per cent. This is a month, remember, when we were supposed to be in recession.

The point is that if things are even not quite as bad as the official picture paints then that should be having an effect on investment decisions.

As I write this the FTSE 100 stands at just more than 5800. It is more than 900 points (or almost 18 per cent) up on the low hit at the beginning of October 2011 and up more than 10 per cent since the start of June.

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