CHUMPS! Two out of three economic forecasters admit they got everything wrong

BRITAIN'S booming economy has humbled top economists, as it is revealed how epically wrong so-called experts were about the impact of the vote to leave the European Union (EU).

By LANA CLEMENTS

PUBLISHED: 14:45, Thu, Jan 5, 2017 | UPDATED: 17:07, Thu, Jan 5, 2017

Two thirds of economists were wrong about how Brexit would impact the economy

But, apparently undeterred by the facts staring them in the face, the very same people are STILL warning that Brexit will still damage the country's long-term prospects. 

About two-thirds of economists surveyed by the Financial Times at the start of 2016 warned a vote to leave the EU would damage the UK's short-term output.

The ‘respected’ experts predicted that uncertainty would block household spending and business investment, leading to a downturn. 

The Treasury, Bank of England and the International Monetary Fund (IMF) were also among the economic elite that participated in financial scare-mongering over a Leave vote, including a stock market and house price crash. 

In fact, spending has surged since the referendum and key segments of the economy reached multi-year highs in expansion. 

Britain's stock markets have also reached record highs, while house prices continue to surge.

Kevin Dowd, member of Economists for Brexit group, said: “This latest review of dismal economic Brexit forecasting comes as no surprise, given that the overwhelming majority of economists and supposedly respected bodies have been proven spectacularly wrong on the short-term impacts of Brexit. 

"Mostly, these forecasts were based on the poorly-evidenced effects of supposed policy ‘uncertainty’ and expected lower growth potential outside the EU.

"As it turned out, the economy had a strong head of steam going into the vote and a positive recovery in the weeks and months following, with GDP figures in particular demonstrating that uncertainty has not undermined economic performance.

"What is most concerning is that these very same economists appear to be wedded to a set of forecasts which see the UK economy shrinking in relative terms over the long-term, based on flawed models and entirely misleading assumptions."

In further evidence that scare-mongering experts were wrong, economic growth jumped to 0.6 per cent in the third quarter of 2016 - the three months immediately following the vote. 

This compares to growth of 0.2 and 0.6 per cent in the first quarter and second quarters, respectively.

The most recent data indicates that fourth quarter growth will be at a similar level of around 0.5 per cent.

Output in the all-important service sector, which accounts for around 75 per cent of Britain's economy, reached it's highest level in 17-months in December. 

At the same time, manufacturing expansion reached a two and a half year high. 

The experts will be proved wrong again, according to establishment critics who say Britain's economy can continue to power through Brexit negotiations after Article 50 is triggered. 

John Redwood, chief global strategist at Charles Stanley, said: “Many UK economists have been forced to eat their words following incorrect forecasts last year. 

“These economists are predicting yet more gloom for 2017 despite evidence to the contrary."

The majority of experts are forecasting a slowdown because they believe rising inflation will slow spending and Brexit uncertainty will kick-in to hurt business investment. 

But Mr Redwood said: "We disagree with these forecasts and are optimistic about growth this coming year. 

"Firstly, we believe that the rise in inflation will be limited and incomes will rise. 

"As a result, retail sales will continue to increase, bolstered by the competitive world goods market. 

"This, in turn, will lead to the more pessimistic large companies investing more inwardly to keep up with the buoyant UK consumer.

“The UK is still the fastest-growing major advanced economy in the world alongside the USA. 

"If Trump cuts taxes and spends more as he has promised, the stronger US economy will boost the UK. So let’s hope the forecasters cheer up a bit and start getting their predictions right for a change.”

http://www.express.co.uk/finance/city/750641/Brexit-bashing-economists-admit-they-got-it-wrong

EU CRACKS DEEPEN: Germany and ECB set for showdown as inflation soars to four-year high

TENSIONS between German politicians and the European Central Bank (ECB) are likely to erupt again after inflation in the eurozone jumped to its highest level in four years in December.

By LANA CLEMENTS

PUBLISHED: 03:38, Thu, Jan 5, 2017 | UPDATED: 08:43, Thu, Jan 5, 2017

The cost of living jumped to 1.1 per cent last month, almost double November's 0.6 per cent, as measured by official European Union data office Eurostat.

Prices across the bloc are now rising at the fastest pace since September 2013. 

But Germany saw a much higher rise in price inflation at a hefty 1.7 per cent, making life more expensive for residents within the eurozone's largest economy. 

Investors fear the inflation figures will make the next meeting of ECB governing council in March one of the most difficult, as policymakers try to implement policies that cover vastly different economies of eurozone members. 

The ECB is helping to drive up inflation across the region with its mammoth money-printing programme, which injects billions of euros into the eurozone every month.

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ECB chief Mario Draghi and Wolfgang Schaeuble have exchanged harsh words in the past

Policymakers hope the extra money will improve lending conditions and stimulate growth across regions. 

Last month the ECB announced the programme would be extended after it had been due to finish in March, as the eurozone faces Brexit and a number of political risks. 

But the surging cost of living in Germany - coming ahead of national elections - means the ECB's policies are expected to attract fresh criticism from Angela Merkel's ruling party, who will be acutely aware of voter concerns.

The ECB will now have to navigate these worries, while still faced with the task of trying to boost growth. 

Naeem Aslam, chief market analyst at Think Market, said: "The Eurozone’s economic data and has raised many questions for investors. 

"The inflation data has shown exceptionally strong reading and this is going to get the blood pumping among hawks who sit on the ECB board. 

"The bank has kept its monetary policy ultra-loose because of lower inflation and rise in fuel prices have started to push the inflation number higher.

"The question is how much the ECB will have to rekindle their asset purchase program if inflation data continue to improve at this pace. 

"This has spooked some investors over in Europe."

Last year German politicians launched stinging attacks on the ECB's ultra low interest rates, blaming the policies for hurting savers and fuelling discontent with Mrs Merkel's ruling party.

The Chancellor's right-hand man Wolfgang Schaeuble has been one of the most vocal critics of the ECB, ridiculing so-called Quantitative Easing by the Bank. 

But head of the ECB Mario Draghi remained defiant in the face of pointed comments. 

Last year he said: "We have a mandate to pursue price stability for the whole of the eurozone not only for Germany.

"We obey the law, not the politicians, because we are independent as stated by the law."

http://www.express.co.uk/finance/city/750230/Germany-ECB-showdown-eurozone-inflation-soars-to-four-year-high

The optimal Brexit strategy is really quite simple – if Britain leaves the Customs Union

Discombobulate means to confuse or disconcert. It’s a word which is likely to become very apt as politicians and the media struggle to define the Brexit strategy between now and the end of March – the deadline for initiating Article 50.

Thursday 5 January 2017 4:45am
Graeme Leach

The greatest benefit of Brexit is the competitive boost of slashing tariffs on imports (Source: Getty)

For the life of me I can’t work out why everybody seems to be in such a spin about Brexit strategy. It’s really quite simple. The focus of our attention needs to be on the Customs Union, not the Single Market. So let’s get back to basics.

There are three economic elements to our EU membership. First, the Customs Union. Second, the Single Market. Third, budget contributions. Within the Customs Union there are three elements as well, namely import tariffs, export tariffs and the ability (or not) to negotiate free trade deals as a sovereign nation.

Within the Single Market are the familiar four freedoms (goods, services, people and capital), and the impact of EU product and labour market law – in the case of employment law, applying across the whole economy not just the EU tradable sector. Budget contributions are the final element, with the net amount around 0.5 per cent of GDP.

So with regard to the Customs Union, the ideal economic scenario is for the UK to trade at world prices with zero tariffs on goods imported into the UK. This most important element is totally within our control. If we leave the Customs Union, we can unilaterally – under WTO rules – impose zero tariffs on imports.

It would be nice, of course, to have zero tariffs on UK exports to the EU. But this isn’t a necessity. Outside the EU the 0.5 per cent of GDP budget contribution could, theoretically, be allocated to specific sectors (e.g. £1bn to compensate car exporters for a 10 per cent tariff) or more generally in a sharply reduced rate of Corporation Tax.

The idea that we have to be in the Single Market, at all costs, is nonsense. Leaving aside the political reality that Brexit will require an end to the free movement of people, there is the added factor that EU law and regulation is a cost that applies across the whole economy.

Moreover, each passing day seems to add to the news that the threat to the City has been way overblown. My prediction is that within months the consensus will have shifted – to Brexit being a net positive, not negative, for financial services. Throw in the fact that there isn’t a Single Market in services and all the fuss, while not much ado about nothing, is heading in that direction. Those who point to a competitive stimulus from the Single Market need to remember that the greatest competitive stimulus comes from the greatest market i.e. trading at world prices.

If the Customs Union is central, and within our control, it begs the question: could Brexit negotiations happen much quicker than we think? Leaving the Customs Union and implementing free trade under WTO rules does not require a great deal of negotiation – an email with a big zero on it should suffice. The lengthier process would arise from leaving the Customs Union and regaining the sovereign right to undertake trade negotiations. But free trade agreements are a secondary not primary consideration in this free trade strategy.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Read more: "Brexit means Brexit" means something very different to what people think

Read more: Why the Single Market is the problem – not the solution

http://www.cityam.com/256407/optimal-brexit-strategy-really-quite-simple-if-britain

‘EU starting to resemble old Soviet Union with its DICTATED rules and values’

THE EUROPEAN Union is starting to take on the hated traits of the old Soviet Union, according to a controversial advertising guru currently splitting opinion in Germany and Switzerland.

By ZOIE O'BRIEN

PUBLISHED: 11:13, Sat, Dec 31, 2016 | UPDATED: 12:14, Sat, Dec 31, 2016

The European Union has been likened to the Soviet Union by an advertising guru

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Advertising guru Alexander Segert said the EU elite were operating like the old Soviet politburo imposing centralized one-size-fits-all rules and values on everyone in the community.

He added: “They are trying to bring different mentalities and cultures under one roof and level them. And people don’t like that.”

Segert is a deeply divisive figure who has produced some of the most jaw-dropping political and anti-migrant ad campaigns seen in Switzerland in decades - yet the former journalist insists he has a vital role to play in current politics.

The advertising campaigns have received criticism

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Mr Segert was born and raised in Hamburg, Germany but moved to Switzerland after what he called an “EU shift towards centralism”. 

The leader of Swiss ad agency Goal AG has been labelled a fascist, a nazi and a perpetrator of hate. 

Yet the man behind the controversial campaigns insists the EU has begun to resemble the Soviet Union - a place where there is no room for alternative opinion.

Mr Segert rose to unlikely fame when he signed a poster for a debate in Switzerland over whether foreigners convicted of serious crime should face deportation. 

He designed a poster which showed a fluffy white sheep kicking a black sheep off the Swiss flag.

The image spread like wildfire and was adopted by the neo-Nazi NPD in Germany.

Amidst an attempt to sue them for copyright Mr Segert also hailed the success of the ad which he said clearly reached an audience waiting for someone to speak out to them.

The European Union is trying to unite nations under one flag and roll out the same rules Segert says

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Despite huge criticism of his work Mr Segert insists he brings out political debate getting people “red in the face” about politics, instead of ignoring debate.

He said: “The most controversial campaigns we did for SVP led to much bigger voter turnout.

“When your opponent hasn’t any good argument, they always wheel out the accusation of fascism.

“It just shows how helpless they are. 

“We can’t manufacture these fears - they are already there.”

Now, as Angela Merkel looks down the barrel off possible defeat in the German general election, in the wake of migrant crime in her country, Mr Segert is also thinking about the future of his home nation.

Preparing for his move into the German political sphere Mr Segert has already designed and distributed free newspapers across the country.

The handouts were stuffed with cartoons and messages about refugees, highly offensive and drawing on fears of the Germans, with one overall message telling them they must vote AfD.

Mr Segert has designed work for ultra conservative Swiss People’s Party (SVP) and the Austrian Freedom party (FPO).

Right wing Alternative for Germany (AfD) has denied working with Mr Segert, and he has kept quiet about affiliation, yet the newspapers he handed out were in support of the group.

Speaking out about branching out into Germany, Mr Segert said: “Merkel opened the floodgates.

“And now it’s the dominant theme.”

While he claims Merkel’s allies in Europe have criticised his work, and the work of anyone who dares speak out, over fears their rhetoric will be successfully challenged.

Political communication must address the issue, claims Segert.

And his previous campaigns have been uncompromising.

One campaign featured ‘soon to be Swiss’ characters Ivan S -rapist, Faruk B - murderer, and Ismir K - benefits cheat.

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Segert argues his ad campaigns get people 'red in the face' rather than ignoring political debate

Peers in the advertising industry have heavily criticised his tactics, but have each conceded, they are highly effective in rousing debate.

In Austria Mr Segert was charged with incitement over a computer game he designed for the FPO which allowed players to hit mosques on screen.

In 2011 he was acquitted yet the same year his car was set ablaze outside his home by an extreme left-wing group.

http://www.express.co.uk/news/world/748743/Ad-guru-Alexander-Segert-Soviet-Union-EU-German-campaign-Merkel-EU

Housing market still going strong after Brexit according to homebuilders

Housebuilder Persimmon is expected to shrug off the scaremongering that followed the EU referendum over the economy with a positive trading update to the City on Thursday.

PUBLISHED: 00:01, Sun, Jan 1, 2017

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The housing market has not slowed down significantly after the EU referendum

In early November, Persimmon said the referendum continued to have little impact on the appetite for new homes after its private sales rate raced 19 per cent ahead of last year since it reported full-year results in August.

Persimmon said the new homes market continued to benefit from “resilient consumer confidence and strong lender support”. 

Its update to the market comes a week after larger rival Bovis Homes issued an unexpected profit warning, blaming a slowdown in the build and sales rate in December.

Bovis said that the number of homes sold by the end of the month would be lower than anticipated, with 180 sales being deferred into early next year because of “slower than expected build production”.

Persimmon shares dropped after the referendum but rallied as the year drew to a close

Persimmon’s shares dropped to £13.60 soon after the EU referendum, but closed out the year at £17.76.

The latest mortgage approval data will also be released this week, with observers keen to see whether a slight fall in approvals in November can be reversed.

http://www.express.co.uk/finance/city/748929/brexit-housing-market-still-strong-homebuilders-uk-persimmon