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Happy talk

The latest Consensus Forecasts have landed on my desk.

You might remember from a previous entry that Consensus Forecasts is a simple document that compiles all the reputable forecasts that are out there – and ingeniously takes the average of them! I think of it as a very useful compendium of the general economic view of where the economy is going.

(As it happens, I also think that economic forecasts are of limited value as the periods that are worth forecasting - when the economy turns up or down - tend to be the periods that are most unpredictable.)

But that all being said, short-term forecasts have a value and Consensus Forecasts is the best way of seeing where we are. The interesting feature this month is that the forecasters seem to have been upping their dose of happy pills since last month.

The UK is now expected to grow 2.6% this year, not the 2.5% a month ago. The Eurozone is expected to grow 2.1%, not 2.0. But most striking, the US is now expected to grow at 2.7% this year, not the 2.4 previously reported.

In all three economies, the forecast growth of personal consumption has been raised. The odd thing about the change is that this was the year that the US and the rest of us began to converge, as the Eurozone grew faster, and the US slowed down.

Now, it seems, economists are postponing that convergence. It seems they think the golden scenario prevalent over the last few years has another year to run, and the US can continue to outpace everybody else.

Given the momentum in the world economy at the moment, economists are probably right. But at some stage, doesn’t it seem like the US has to slow down?

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