The below chart sums up the extraordinary announcement from the Office for Budget Responsibility. George Osborne did his best to maintain the “things are worse than we thought” line but the reverse is true. Unemployment, inflation, the deficit – everything is better than not only the Treasury forecast but better than the market had been preparing for. (And Citibank, which compiled the graph, thinks things will get better still – because the economy will keep surprising in the upside).
I have a piece in the Daily Telegraph saying that this will be deeply irritating for Osborne. His plan was conceptually fine: that he’d create an external agency, which would demolish Brown’s Potemkin Village and show the full unvarnished truth. But the OBR has made its first announcement just as the economy is on the turn. Manufacturing, house prices, gilt yields – on almost every metric you can think of, things are not as bad as had been feared.
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