SO, we may have managed to avoid a recession by the skin of our teeth in 2022 – bring out the bunting and pop open the champagne bottles. 

But did anyone in the real world notice things were not as bad as feared given the hefty rises in energy bills, mortgage costs and food inflation? I think not.

We’re told that overall inflation could fall from the current 10.5 per cent to around 4% by the year’s end, which sounds nice but, of course, it doesn’t mean prices for services and goods we buy in the shops will be falling, it just means they won’t be rising as fast as they once did. 

As the latest ONS numbers were released, Jeremy Hunt did his best to point to the sliver of a silver lining rather than the great big black cloud hanging over the UK by saying it had had the fastest-growing economy in the G7 in 2022 and the fact we hadn’t fallen into a slump showed the British economy was “more resilient than many feared”.

Noting, however, the country was “not out of the woods yet”, particularly on inflation, the Chancellor added: “If we stick to our plan to halve inflation this year, we can be confident of having among the best prospects for growth of anywhere in Europe.”

The ONS figures showed that last year the country’s growth performance rested mainly on the economic uplift in Q1 as businesses and households benefited from the end of lockdown restrictions. Since then, the momentum in GDP has petered out, ending the year in December with a worse-than-expected 0.5% contraction.

The figures are often revised later on because the initial assessment is based on only around two-thirds of the available data at the time. 

This means if the numbers are later revised upwards, fine, but if they’re revised downwards, then the final judgment would be that Britain had indeed fallen into a recession in 2022. The next time the figures will be updated is on March 31.
And, of course, it’s worth noting the UK remains the only G7 country where the economy is smaller than before the pandemic struck.

Plea to Chancellor
AS Liz Truss’s merry band of tax-cutters continue to bend Hunt’s ear about the need to lower taxes in next month’s Budget, pressure is now mounting from the likes of Labour, the SNP and consumer champion Martin Lewis for the Chancellor to halt the 20% price cap rise in April from £2,500 to £3,000, given the falling price of energy and the financial leverage this presents.

While Hunt said he doubted the Treasury had the “headroom to make a major new initiative to help people”, I suspect that this would offer a great opportunity for the embattled Chancellor to throw a ray of sunshine on what is expected to be a pretty bleak fiscal statement on the Ides of March. 

Given the political circumstances, the Surrey MP couldn’t possibly pass it up.
In the number-crunching frenzy at the Treasury before any Budget, Hunt has asked for a number of sunshine options to show the government still has some control. One is said to be greatly expanding free childcare in England, with a 30-hours-per-week entitlement to one and two-year-olds. 

But the move would cost billions of pounds and comes amid the CBI’s call last week for UK ministers to direct billions into free childcare to help enable more parents to return to work to tackle Britain’s acute workforce shortages.

Research has suggested inadequate access to childcare prevents as many as 1.7 million women from taking on more hours – it’s estimated this equates to more than £28 billion in lost economic output each year.

Economic forecasting is more of an art than a science, to say the least. Because of all the moving parts involved in an economy and often unexpected external factors, what seems reasonably accurate at one moment in time becomes inaccurate at another. 

The International Monetary Fund, renowned for revising its forecasts, offered the unhappy view that Britain would be the only major economy to suffer a contraction this year.

Last August, the Bank of England warned Britain was heading into recession in Q4 once again, yet figures released in January revealed the economy unexpectedly grew by 0.1% in November.

Policymakers in Threadneedle Street claim inflation is almost “guaranteed” to come down rapidly this year barring an unexpected global event while Andrew Bailey, the Bank’s governor, expressed concern to MPs about the continued persistence of inflation but told them he expected the rate to halve in 2023.

And the Old Lady still expects the UK to enter recession this year – only that the slump will be shorter and less severe than previously forecast.

Anaemic forecast
IT seems the best we can hope for in 2023 is an economic plateau as growth flatlines – the word “anaemic” is on many economists’ lips. 

And yet the National Institute of Economic and Social Research has given a more rose-tinted view, saying Britain will narrowly avoid a recession this year.

Nonetheless, it admits it will “certainly feel like a recession” with real personal disposable income having contracted for four consecutive quarters. 

The think tank suggests the income of one in four UK households – seven million families – won’t be able to fully meet their planned energy and food bills in the coming financial year, up from one in five in the current one.

Last week, the Fraser of Allander Institute suggested Scotland could be in recession for much of this year, warning of a “difficult” outlook for households throughout 2023. 

The economic think tank predicted Scotland’s economy would shrink by 1% this year before growing by 0.6% next year.

As we spend the next 12 months macheteing our way through the cost-of-living jungle and are presented with a welter of differing opinions from experts to guide us along the way, I’m reminded of the perceptive view of the late American economist and diplomat John Kenneth Galbraith, above, who said: “The only function of economic forecasting is to make astrology look respectable.”