Polls vs Punters

Monday Briefing Punters
Last week's opinion polls and bookmakers' odds show a much diminished likelihood of a UK exit from the European Union.

The average of the last six opinion polls show that, excluding Don't Knows, Remain is on 55% and Leave on 45%. That is the biggest lead for Remain in three months. The bookmakers' odds have moved even further. At the end of last week they were pricing in just a 22% chance of Brexit, the lowest reading in a year.

The betting odds are widely seen as offering a better guide to the final outcome than opinion polls. The polls are an attempt to create a representative snapshot of how people feel today; the odds are the product of people staking money on the outcome of a future event. In theory, those odds should incorporate all available information, not just the latest polls.

Then there is the problem of which poll to believe. Even polls carried out on the same day, by the same pollster, can show wildly different results on the Brexit question depending on whether it was carried out on-line or by telephone.

Since the Prime Minister announced the date of the referendum on 20th February on-line polls have on average shown Remain and Leave neck and neck. Over the same period telephone polls show Remain ahead by eight percentage points.

One theory is that Eurosceptic opinion may be over-represented in on-line polls, as voters with strong views are more likely to sign up for on-line survey panels. Another is that by asking people to choose between Remain and Leave telephone polls confront people with the choice they will face in the polling booth, avoiding the escape clause of "Don't know" widely offered by on-line polls. Including a Don't Know option seems to siphon support from Remain and, on this theory, provides a misleadingly strong showing for Leave.

History suggests that faced with uncertainty and complexity voters tend, as they did during the Scottish referendum in 2014, to stick with what they know. In the last month the Don't Knows have accounted for between 5 and 25% of those polled, more than enough to shift the result in either direction.

The supposed superiority of telephone polls over on-line polls and of bookies odds over all polls point to a commanding lead for Remain. A spokesman for Ladbrokes told the Financial Times that 90% of the money it has received is for the UK staying in the EU and punters see Remain as, "a rock solid bet".

Yet while Remain is the clear front runner this is still a two-horse race.

The punters are often, but not always, right. In the run up to last year's UK General Election the bookies were offering odds of 7/1 on a Conservative majority, an implied probability of just over 12%. This enabled a Glasgow pensioner to pocket £210,000 on a bet placed ten days before the vote. More recently the bookies got it wrong over Donald Trump's success in the Republican primaries and Leicester City's Premiership triumph.

Continue reading

Posted on 23/05/2016

Low-key growth

Monday Briefing growth2

We start this week's Briefing with a question. In which region or country – the US, Japan, euro area or the UK – have expectations for GDP growth remained most robust over the last year? A clue: it saw the fastest GDP growth in the first quarter of this year.

The answer is the euro area. The outlook for the US, Japanese and UK economies has deteriorated markedly in the last year while euro area growth expectations have seen only modest downgrades.

Continue reading

Posted on 16/05/2016

Latest news vs the long view

Monday Briefing News
Forecasting is, as we observed in last week's briefing, a perilous business. To stand a chance of being right about the future you need to understand where you are now.

So it makes sense to pay attention to what the latest data and news are saying. Certainly economists and journalists pore over every new piece of data looking for signs of where the economy is heading. 

Continue reading

Posted on 9/05/2016

How to be a better forecaster

Monday Briefing Forecast
It is not hard to think of recent events that have taken experts by surprise. From Donald Trump's success in the Republican presidential primaries to Jeremy Corbyn's election as leader of Britain's Labour Party the last year offers plenty of examples of insiders getting it wrong.  Pollsters, regulators, intelligence experts and, of course, economists, have suffered reputational setbacks in recent years as the future failed to conform to their theories and expectations.

Continue reading

Posted on 3/05/2016

Brexit and the opinion polls

Monday Briefing Opinion Polls
Last week was a good one for the 'remain' camp in the UK's EU referendum campaign. The Treasury published an analysis of the economics of leaving the UK which concluded that a Brexit would involve significant net costs for the UK. Later in the week US President Barack Obama warned that outside the EU the UK would be "at the back of the queue" for a trade deal with the US.

But where does public opinion stand?

Continue reading

Posted on 25/04/2016

Technology optimists and pessimists

Monday Briefing Technology
Last Wednesday evening the House of Lords held a 90-minute debate on a Deloitte research paper, published last summer, entitled Technology and people: The great job-creating machine Written by myself and my colleagues, Debapratim De and Alex Cole, the paper examining census data for England and Wales since 1871 to track the relationship between technological innovation and the destruction and creation of jobs.

Continue reading

Posted on 18/04/2016

Investment returns through the financial crisis

Monday Briefing Gold
Last week we held a lunch at our London offices to mark the eighth anniversary of Deloitte's UK CFO Survey. The Bank of England's Chief Economist, Andy Haldane, gave the guest address.

The CFO Survey started in the third quarter of 2007. That quarter also saw a run on the UK building society Northern Rock and UBS declare $3.4 billion of losses on US sub-prime mortgages. As such, the third quarter of 2007 has a good claim to mark the beginning of the global financial crisis.

Continue reading

Posted on 11/04/2016

Brexit tops CFO risk list

Monday Briefing Europe Magnified
The latest Deloitte survey of UK Chief Financial Officers, released this morning, examines the thinking of some of the UK's largest corporates on the forthcoming referendum on EU membership.

The survey shows that support for EU membership among CFOs has risen. 75% of CFOs say that it is in the interests of UK business for the UK to remain in the European Union, up from 62% in the fourth quarter of 2015. 8% of CFOs favour leaving the EU, up from 6% in the fourth quarter. 17% of CFOs say they either don't know, have no strong opinion or prefer not to say.

Continue reading

Posted on 4/04/2016

One big economy that is doing nicely

Monday Briefing map in bloom
Which is the only major emerging market economy to have seen an improvement in its prospects for growth this year? A clue is that this country is likely to be the world's fastest growing major economy in 2016.

The answer is India. It is expected to post 7.5% growth this year. This rate of growth would put India well ahead of the other fast-growing economies in the world: Vietnam at 6.8%, China at 6.5% and the Philippines at 6.3%.

Continue reading

Posted on 21/03/2016

Europe deploys the super bazooka

Monday Briefing Banking
The global economy has faced one its periodic growth scares in the last few months. All the classic signs are present. Equities have slumped, business confidence is slipping and economists have cut their expectations for growth and inflation for most countries. 

Pressure on policymakers to "do something" has mounted. But so, too, have concerns that policy stimulus is becoming increasingly ineffective and that, as the Economist front page put it a couple of weeks ago, policymakers are "Out of ammo".

Continue reading

Posted on 14/03/2016

Carry on consuming

 

Monday Briefing consumer shopping
Last week 2,833 delegates from across China met in Beijing for the annual National People's Congress. Less than a mile away a smaller gathering took place, as Deloitte economists from around the world met for Deloitte's Global Economics Forum.

One of the messages to come out of the Deloitte Forum is that manufacturing, exports and investment are under pressure across the world.

Continue reading

Posted on 7/03/2016