Newspapers have pounced on comments made by the Bank of England’s chief economist as evidence economists were wrong to predict financial gloom in the wake of the EU referendum.
Andy Haldane compared forecasts ahead of the 2007-09 financial crash to Michael Fish’s infamous “there’s no hurricane coming” error in 1987.
Speaking on Thursday he said: “Remember that? Michael Fish getting up: ‘There’s no hurricane coming but it will be very windy in Spain.’ Very similar to the sort of reports central banks - naming no names - issued pre-crisis, ‘There is no hurricane coming but it might be very windy in the sub-prime sector.
Michael Fish’s Hurricane ‘Error’ (full video with suitably 80s music below)
In 1987, BBC weather forecaster, Michael Fish responded to a viewer’s call in which a worried woman asked if it were true that a hurricane was headed for the British Isles.
Fish emphatically denied the rumour, saying: “Earlier on today, apparently, a woman rang the BBC and said she heard there was a hurricane on the way... well, if you’re watching, don’t worry, there isn’t!”
That evening 18 people were killed as winds up to 122mph battered the country.
Haldane said: “Look at how weather forecasting has changed itself in the period since. Actually there has been a dramatic improvement in our capacity to forecast the weather... a revolution in weather forecasting.
“Much more data is being thrown at the problem and that has brought about a transformation. And some of the self same could be true if we move from weather forecasting to economic.”
Haldane was then asked by the audience at the Institute for Government in London on Thursday, whether or not a similar error had marred financial predictions for post-Brexit Britain.
He quipped “It’s been very windy in Spain,” before adding: “It’s true, again, fair cop.
“We had foreseen a sharper slowdown in the economy than has happened, in common with almost every other mainstream macro-forecaster.”
Post-EU referendum, UK economic growth showed surprising resilience in the face of recession fears, with warnings from the Bank of England proving unfounded in the short-term, it was announced earlier this week.
On Friday morning, newspapers and commentators alike used this to bolster evidence that fears Brexit will have a negative effect on the UK economy were without merit, despite Haldane primarily referring to the 2007 financial crash rather than Brexit.
Whilst the Daily Express has been crowing similar headlines almost continuously.
But the short-term boost to the economy does not look so rosy in the long-term.
The pound’s plunge in value since the June decision may see growth falter in 2017 - as policymakers warned just his week over an inflation shock that could spark a cost of living crisis for many.
Experts are concerned surging prices from weak sterling will bring an end to the consumer spending spree that has helped prop-up growth since the referendum.
The Office for Budget Responsibility (OBR) has also revealed the economy is set to take a hit of almost £60 billion over the coming five years as a result of the Brexit vote, while slashing growth forecasts and predicting higher than previously expected borrowing.
Yael Selfin, Head of Macroeconomics at KPMG, told The Huffington Post UK: “I think [2017] is likely to be relatively volatile, we’re likely to see a number of storms, the triggering [of Article 50] is one that we’re expecting.
“[Individual consumers] need to bear in mind that inflation is coming up and it will hit their purchasing power which is unlikely to go up significantly.
“Consumers need to plan for higher inflation and less money to spend but at the same time interest rates will remain low so that will be helpful and they just need to be able to adjust to new circumstances.
Haldane actually stood by the Bank of England’s “gloomy” forecasts but admitted they may have got the timings wrong in not anticipating strong consumer spending over the Christmas period.
He said: “I think, near-term, the data, the evidence we’ve been accumulating since the referendum, has surprised to the upside. [There’s been] greater resilience, in particular among consumers and among the housing market, than we had expected.
“Has that led us to fundamentally change our view on the fortunes of the economy looking forward over the next several years? Not really.”
Also, a fact often-overlooked, Brexit has not actually happened yet.
Selfin said: “We don’t know what the ultimate Brexit deal will be and we won’t know for some time - there’s very little we know at the moment.
“We’re expecting consumers to be worse off because of the lower value of the pound which has already happened. We’re also likely to see commodity prices to increase.
“The triggering of Article 50 itself should not in theory impact consumers it’s the volatility and uncertainty around it how the business and markets react that will impact them.
“We’re unlikely to get clarity for some time - it’s almost like a new status quo for the medium term, a medium term of unpredictability and uncertainty.
“It doesn’t mean people can’t go on with their lives but it’s a slightly new reality for a few years.”
Inflation surged to a two-year high of 1.2% in November in a sign that the pound’s sharp fall since the referendum is beginning to impact prices.
The Bank of England this week predicted inflation will jump as high as 2.7% in 2017, while influential think-tank the National Institute of Social and Economic Research has said it could hit almost 4% next year.
Policymakers said their December rates meeting that activity had been “remarkably steady”, but growth is set ease further to 0.4% in the final quarter and the Bank has said cracks are beginning to show in business surveys, confirming expectations of a slowdown in 2017.