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Getting Your Crystal Balls in a Twist

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United Kingdom  finance  GDP  Double Dip Recession  Dead Cat Bounce  The Telegraph  The Guardian  Nationwide Building Society  Peter Mindenhall 

Getting Your Crystal Balls in a Twist

By - Wednesday 27 October 2010

After a prolonged hammering by the press, the UK economy finally had something positive happen to it yesterday.

Double boost for UK recovery plans (The Independant)

UK economy grows twice as fast as predicted (The Telegraph)

UK economy grew by 0.8% in last quarter (The Guardian)

Despite the repeated announcement of market fears of a double-dip recession and the end of the world being as good as nigh by all and sundry in the economic world, it would seem there has been a surprise uptick in the UK economy.

The public on the other hand have not taken this so well; most pointing out that the numbers don't really stack up (which with some fairly simple arithmetic is true). The point is though that as a result of positive figures coming out - guess what?  The stock markets were up for about an hour, only to fall amid a bunch of profit-taking.

What does all this tell us?

Well it tells us a few things. Firstly - good news will move a market. Granted, in this case it is only for a short period of time, but nonetheless it will move the markets. Think for a moment if the news and numbers had actually stood up to slightly more advanced scrutiny than that of a pre-school mathematics student? The financial world would be on fire right now!

Secondly - repeated doom-mongery has a shelf life. At the end of a second article by The Telegraph the Nationwide Building Society have said they believe that house prices will continue to fall when figures are released later this week. No doubt this will add more fodder and create more poor analysis by property journalists to drive the market down just that bit further.

Lastly - the press and financial spokespeople out there really don't seem to be able to get this right. After months of continually reporting month-on-month poor figures for the housing markets (even more frequently than that in some cases) and forever stating that the economy is collapsing around everyone's ears, the market does move in a positive direction if there is good news out there.

I'm not suggesting for an instant that we should all bury our heads in the sand and ignore the fundamental statistics that make the monetary world go round. The point is that the economists out there have not got it wrong. The wrong-doing has come from the way the figures are used to create "news".

We may well still see a little more erring back towards the double-dip (or indeed a dead cat bounce) but the bottom line is that the UK will stay in the recession as long as the media feels it needs to, and as long as the press continues to believe that doom is what the public need to hear. Quite what the media feel they gain from doing this is a mystery.



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