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Welcome to 2024, a year in which it appears that economics may not be an exact science!

I realise this is both shocking and controversial for our readers and particularly worrying in the world of AI. We are just so used to our screens and our journals delivering numbers and financial interpretations of those numbers as if they are factual evidence of a trend or a fiscal scenario. But Ipsos and YouGov tell us that there is no issue more important to voters than the economy, placing it ahead of immigration and health when it comes to your piece of paper going into that ballot box.

So, I thought it would make sense to do my own research this morning, online and across the airwaves and I have distilled my findings as follows. There appear to be 2 (very clear?) schools of thought being peddled right now by the economic expert community. In the first we are told that a recession in the last quarter of 2023 and into 2024 is inevitable. Manufacturing output…DOWN. GDP….DOWN. In fact most economic indicators…..DOWN. In the second we are led to believe that the UK is being led out of austerity, out of the pandemic, out of the cost of living crisis and away from the impact of war in Ukraine. We are steering a course away from recession, towards the leafy green pastures that will bring an end to the financial insecurity that has haunted us for so long.

The truth as always, lies somewhere in between and politics, yes politics, with the prospect of a general election looming, is really beginning to get in the way. I mean, we may well be near the bottom of the G7 table, but next year will see us ‘outpower’ the German economy, say some, usually government spokespeople. Can our economic expert community give us any truths to hang our hats on as we look in our crystal ball deep into 2024?

According to Bloomberg and The Evening Standard, the UK economy probably will avoid a recession in 2024 and strengthen in the second half of the year as consumers benefit from falling inflation and the easing of a lengthy cost-of-living crisis. The 52 economists surveyed by Bloomberg in their recent report, believe the Treasury and the Bank of England will engineer a soft landing for the economy next year, with growth of 0.3% and a recession averted.

“The outlook is far rosier for 2024 than expected 12 months ago,” said Barret Kupelian, chief economist at the consulting firm PwC, a leading firm of consultants, accountants and business advisers, no doubt counting various UK government departments amongst their clients.

Sunak and Hunt have been laying the groundwork for a growth-enhancing consumer boom, scheduling a budget statement on March 6 to highlight the centrepiece of their agenda. An improving outlook would help Sunak and Hunt’s argument that they’ve piloted the UK through a difficult patch following the pandemic and war in Ukraine, which sent inflation soaring.

In his budget, Hunt is expected to put more money in the pockets of consumers by taking 1% off income tax and handing households £7 billion ($8.9 billion) a year from April.

Green shoots maybe, but it’s still difficult out there. Almost a third of the economists who submitted quarterly forecasts to the Bloomberg survey expected a contraction in the final three months of 2023. That would put the UK in recession under the common definition of two consecutive quarters of negative growth.

The Evening Standard tells us that at last month’s Autumn Statement, Hunt announced a 9.8% increase in the minimum wage for those aged 21 and over, an 8.5% increase in the state pension and a 6.7% increase in working age benefits. The up-ratings take effect from April. With the inevitable Labour victory around the corner could Sunak and Hunt get lucky? With a 2% cut in National Insurance, a typical household energy bill on track to fall 14% in April, consumer price inflation dropping faster than expected, current trends have shifted the debate about interest rates away from further increases and towards cuts starting from the middle of next year, a big help to mortgage borrowers, about 20% of whom will have to refinance their loans next year. With markets tilting toward rate cuts, those whose low-cost deals are ending are facing a much less severe hit than analysts had warned of.

“We are back on the path to healthy, sustainable growth,” Hunt said this month after the surprisingly sharp fall in inflation from to 3.9% for November from 4.6% the month before. For the first time since 2018, households may feel noticeably better off. Investors are investing again and if the stock market is anything to go by, the only way is up. Or is it? The FTSE 100 jumped in the final weeks of 2023 but house prices look like they will continue to tread water, according to Halifax and Nationwide.

Even so, the outlook remains unusually uncertain and the main risk is that the economy holds up and inflation proves more stubborn than expected so the Bank of England is unable to provide the anticipated stimulus of rate cuts.

And there it is…..the word ‘uncertain’. The most important tool in an economists financial toolbox. Anything can happen and of course, it probably will. But let’s enjoy the moment, if we dare.

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