Chart of the week: Economists’ unblemished record of failure

Global GDP change

In 2001, Prakash Loungani, an economist at the International Monetary Fund, surveyed the accuracy of economic forecasts throughout the 1990s. They were useless. “The record of failure to predict recessions is virtually unblemished,” he concluded.

Now Loungani has updated his research to the past few years, and economists’ “record of failure remains impressive”, as Tim Harford notes in the FT. He looked at data for 77 countries, of which 49 fell into recession in 2009.

Economists had not called a single one of these recessions by April 2008, even though the news was full of the ‘credit crunch’, and Northern Rock and Bear Stearns had collapsed. “It did not take a genius to see trouble was on the way.”

Yet, even in September 2008, the consensus remained that no country would suffer a contraction. By September 2009, analysts had got the message, but then went overboard the other way: 54 recessions were predicted, five more than there actually were.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.