Mindworks’ Weblog

Thinking Matters

Finger in the wind

Posted by Andrew Cooper on January 29, 2009

After hearing yesterday’s IMF forecast for the UK’s economy I wondered what they were saying this time last year.

According to this, they were suggesting that the economy would grow 2.4% in 2009.  By April they had revised this to 1.6% in both 08 and 09.  As late as July of 08 they’d revised the forecast for 09 to 1.7% and for 08 to 1.8%.

Their latest guess is that the UK economy will actually shrink by 2.8% this year.  What’s that line about past performance being no guide to future performance

I haven’t read the actual report so I don’t know whether the IMF’s economists are hedging their bets (‘the UK economy might shrink by 2.8% this year but, quite frankly, we haven’t got the faintest idea’).  Such is the level of gloom at present I guess that anything is possible.  One thing’s for sure, though: behaviour will determine what actually happens – the behaviour of politicians, investors and everyone else and how we will actually behave is impossible to predict with any certainty.

Talking of fingers in the wind, here’s how things looked in 2006 when US house prices had started falling but either probably would/or probably wouldn’t lead to a recession.   You can see how easily cognitive dissonance would ensure that readers only saw the ‘probably wouldn’t’.

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