Buying long, selling Langer: Rosy forecasts mislead the business community – The Post

Buying long, selling Langer: Rosy forecasts mislead the business community

November 16th, 2014 7:00 pm| by admin

Rosy forecasts from professional forecasters – at the Finance Ministry, the Central Bank, the economic councils and the big banks – are misleading the business community.

Political interest
It’s hardly any wonder that the government, through the Finance Ministry, is trying to paint a rosier picture of the economy than there really is. There’s not long until a parliamentary election.

It’s also understandable that the central bank is typically in the optimistic corner because negative announcements can be self-fulfilling through their effect on consumer and business confidence.

Doing damage
But the banks holding on to a far too optimistic picture of the macroeconomic outlook can damage companies in the business community, the banks themselves and the national economy. Despite there being a flood of negative signals in the past months, there continues to come positive evaluations of the Danish economy by forecasters.

An example is an analysis by Danske Bank that attempts to downplay the worst outlooks for Danish industry since 2008-2009. The figures are an interpretation of the national statistics office’s economic trend predictor, which gives a huge warning to the business community.

Producing problems
The weird thing about the numbers is that companies are continuing to produce at full blast. They think the decline is temporary and – if they listen to the big banks, the central bank and the government – it’s obvious why they think this way.

Some readers might think my publication, Økonomisk Ugebrev (Economics Weekly), likes to be negative and highlight the worst key figures.

But nothing could be further from the truth; we would much rather tell positive stories about progress in the economy: about new growth, more in employment and improved wealth among Danes. But if that’s not what’s happening, then we can’t change it.

Our mission is to cut through the fog and tell pure and unfalsified stories based on facts and the raw economic data.