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March of the makers isn't really getting us very far


Willem Buiter explained that the Bank of England had transcribed wrongly what he voted for

Willem Buiter explained that the Bank of England had transcribed wrongly what he voted for

Willem Buiter explained that the Bank of England had transcribed wrongly what he voted for

I was in the US at a conference last week with the chief economist at Citibank, and the former MPC external member Willem Buiter, who has long been my hero: in March 1999 he became the only person who ever voted for a cut not divisible by 25 – the records show he voted to cut by 40 basis points.

For years I had been wanting to ask him why 40, rather than 39 or 41 for that matter – it looked like false precision. He explained to me, charitably, that the Bank of England had transcribed wrongly what he voted for. He had wanted to split the difference between those voting for 25 basis points and those discussing a 50-point cut, so decided to split the difference at 37.5 basis points, and they rounded it up. Now it all makes sense. An important footnote for the economic historians.

Somewhat surprisingly, we agreed on most stuff, especially about the UK economy. The one thing we differed on was when the first rate rise will come – he thinks early in 2015, I think later, not least because the UK economy seems to be slowing and inflation is sliding. I just think there is more labour market slack than he does.

The IMF last week, in its latest World Economic Outlook, forecast that global growth would average 3.3% in 2014 – unchanged from 2013 – and to rise to 3.8% in 2015. These forecasts are 0.1 points and 0.2 points lower than the IMF predicted in July 2014. The weaker-than-expected growth outlook for 2014, the IMF noted, "reflects setbacks to economic activity in the advanced economies during the first half of 2014, and a less optimistic outlook for several emerging market economies".

In particular the IMF lowered its growth forecast for Germany by 0.5 points in 2014 and 0.2 points in 2015 to 1.4% and 1.5%, respectively. The IMF has forecast that the UK economy will grow 3.2% in 2014 and 2.7% in 2015. This is a higher rate of growth than the US in 2014 (2.2%) but lower in 2015 (3.1%).

The National Institute of Economic Research (NIESR) estimates that the UK economy has started to slow, with GDP growing 0.7% in the three months ending in September, after growth of 0.8% in the three months ending in August.

According to their estimates, 75 months after the recession started the economy is 3.5% larger than it was at its previous peak in January 2008. In all of the 20th century recoveries, output was at least 8% above its starting level this far out from the start. In the recession of 1930-34, at this point the economy was more than 12% larger than at the start. I do recall that George Osborne, in his 2011 Budget speech, made growth in manufacturing output and jobs front and centre in his economic strategy. "So this is our plan for growth. We want the words: 'Made in Britain', 'Created in Britain,' 'Designed in Britain', 'Invented in Britain' to drive our nation forward. A Britain carried aloft by the march of the makers. That is how we will create jobs and support families," he said.

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According to the ONS, since May 2010 private-sector employment is up by about two million, and manufacturing employment is up by 150,000. The manufacturing share of private-sector employment has fallen over the same period from 13.3% to 12.8%.

Not many makers marching that I can see.