The London Business School with Gower Publishing

In the last six months manufacturing output has risen at a rate in excess of 10 per cent while inflation has dropped to 1.2 per cent, its lowest level in a generation. Unemployment has fallen for five successive months. None of these developments was forecast - either by us or, so far as we are aware, by anyone else. How is that the British economy continues to surprise all the forecasters and will it continue to do so? We examine the shift in the forecast consensus over the last year and ask whether the revisions will have to continue. Our conclusion is that some of the most recent optimism is misplaced and that there remain setbacks ahead both in terms of output arid inflation. Nevertheless, it would appear that the risks are on the right side, that if anything output is likely to rise faster and prices more slowly than the current Consensus.