My economist can beat up your economist

Watching the UK economy from afar, it's striking how much people's take on what's going on is driven by how they voted in the referendum back in June.  The Remainers (or Bremoaners as the tabloid press has christened them) see economic disaster looming at every turn, while the Leavers are gloating that the most dire pre-referendum predictions have failed to materialize.

Some of the discussion has been truly bizarre.  The "Project Fear" campaign on the Remain side was clearly overdone, though not nearly as mendacious as the Leave side's promises, which have long since been reneged upon.  However, the willingness of Leave campaigners to declare, within days of the vote, that since the sky hadn't actually fallen, everything would be all right, was clearly premature.  It was always going to take some time for the impact of the vote to be felt; so, six months on, where do things stand?

The Guardian has been compiling a monthly report of key indicators, and the latest update can be found here.  As a strong voice on the Remain side, The Guardian chooses to interpret the data in a mildly negative way: the UK economy is "at a tipping point".  Maybe it is, but you'd be equally entitled to see the figures in a much more positive light. Wages and employment are rising, as are house prices and the FTSE.  The biggest negative that The Guardian can point to is the rise in inflation that has been triggered by the post-referendum fall in Sterling.  That could well crimp household spending power in 2017, arresting the expansion of the economy.

Official forecasts from the Office for Budgetary Responsibility concur that growth will slow last year, but no longer think that the economy will be forced into outright recession.  So what do we make of the opinion of Bank of England Governor Mark Carney, that the British economy is in the  midst of its first lost decade since the 1860s, or the Institute for Fiscal Studies' assertions that UK workers face their toughest squeeze on wages since WWII?  The truth is that both of these observations can largely be traced to developments in place well before the referendum, specifically the fiscal squeeze imposed by former PM David Cameron.  Cameron had already put the country through the wringer well before his disastrous and craven decision to hold the Brexit referendum.  History will not be kind.

In economics you can never test counterfactuals, so it will never be possible to know exactly what the impact of the Brexit vote was.  However, it seems reasonable to assert that the longer it takes to come up with some sort of trade deal with the EU, the worse things will be for the UK economy, and the longer the pain will last.  Markets hate uncertainty more than anything, and the Brexit vote, together with the chaotic follow-up by a totally unprepared UK government, has delivered that by the cartload. That lost decade could easily last a whole lot longer.