Kel Nwanuforo, Andrew Mills and Sharon Raj
The Citizens’ Panels (now the Citizens’ Forum) is a Bank of England discussion forum to engage with the UK public on important topics such as the labour and housing markets, or climate change. It included a forecasting competition, and Bank Underground invited the winners to contribute short pieces about how they evaluate the UK economy, discuss issues of their concern, and to propose solutions.
Part of Bank Underground’s purpose is to give a platform for views from Bank of England (‘Bank’) analysts that may differ from those of the Bank or its policy committees. Alternative views are encouraged within the Bank, but the range of opinions and ways of thinking by analysts is likely to be limited to some extent: by education, experience and less tangible factors such as the language analysts use to explain their thoughts. The Citizens’ Panels therefore offer a rich source of information. By now, they include some 3,200+ participants with a wide range of backgrounds: some are familiar with economics and central banking but many may know little about either. This blog represents the voices of some of those panel members about the UK economy, and how they addressed the forecasting challenge, which we put in front of participants as part of the Citizens’ Forum online community – which by-the-way is open to all.
A participant’s experience of the Bank of England’s Citizens’ Panels (Sharon Raj, London)
I applied to join the first Citizens’ Panel the Bank held in Greater London and have been a panel participant ever since.
Why did I sign up? Partly, interest in the subject matter and curiosity. I worked as an emerging markets economist in the 1990s, so jumped at the chance to hear directly from Bank staff and to participate in debates on topical economic issues. More importantly, however, I felt that the voices of the most vulnerable in society were not being sufficiently heard in many policy debates. This motivated my involvement in the Citizens Advice network, along with a statement on poverty in the UK by the United Nations Special Rapporteur that I found to be highly critical. I wanted to ensure that those most vulnerable in society had the opportunity to have their voices heard in this new forum.
What has the experience been like and what have I learned? In the panel meetings we have discussed a wide range of topics, ranging from our main economic concerns to the job market and housing. Exchanging perspectives with a wide range of attendees has enabled me to develop a much greater appreciation of the lives of those from different generations, different parts of the UK and those living in very diverse economic circumstances.
The Bank ran a forecasting competition for panel members, where we were invited to predict various economic indicators, such as local unemployment and inflation rates. This was both fun and intellectually stimulating, since it forced me to think carefully about the events I experienced in my day-to-day life and what they implied for the local economy. For example, I started to pay closer attention to exactly what I was paying for my shopping each week and how those prices were evolving. Further, I considered more carefully what factors such as movements in sterling exchange rates, oil prices and transport problems might imply for prices in the future. I also reflected more on the impact of shop and office closures that I noticed in my local area, such as how many people were likely to be affected.
Views on forecasting economic outturns as part of the Citizens’ Panel Forecasting Tournament (Kel Nwanuforo, East Midlands)
It was great to participate in the Citizens’ Panel Forecasting Tournament. This had the feel of an engaging, forward-thinking and innovative initiative on the Bank of England’s part. Four aspects of my method proved particularly helpful in undertaking the challenge.
First, the pandemic was the dominant economic event of the period by an overwhelming margin. Naturally, it was necessary to estimate the direct impacts. However, as a first step, I thought it essential to keep in mind the continuing effects of those longer-term forces that have been driving structural change in the UK economy. This meant ensuring that my responses took account of a panoply of different issues. These included changing demographics, relatively high corporate and household debt burdens and the escalating effects of technology on various economic actors and outcomes.
Second, I kept in mind where current data stood in absolute terms and how volatile – or not – data had been in recent years. What trends could be observed? What had moved the dial significantly? Just as importantly, what had not? How had market participants, consumers and business reacted to other modern economic shocks? A sense of context can be valuable in forecasting. History does not always repeat, but it often rhymes.
Third, I was careful to bear in mind the extraordinary monetary and fiscal support made available to ameliorate the negative effects of the pandemic. This was arguably overlooked in some early press coverage.
Finally, while no-one should forget that the plural of anecdote is not data, I took account of what I was seeing with my own eyes during this period, too. That did not seem to tally with some of the most downbeat predictions being made at the time.
Even most professional economists would not claim that there is a single, definitively correct means by which to forecast economic outturns. My experience throughout this challenge has been that taking as broad and as comprehensive a view as possible is the most worthwhile approach.
Views on current challenges and future opportunities for the UK economy (Andrew Mills, North West)
During my 26 years in luxury goods I have observed how base rate increases and decreases, employment rates, skill levels, and consumer confidence have shaped the industry. My vast experience in the luxury goods industry allowed me to make forecasts on spending, inflation, and the base rate, as I can look back and see how these were affected when the overall economy was thriving or struggling. Many economic factors are cyclical, and even in these unprecedented times I could draw upon my experience to inform my forecasts.
The Panel has helped me to understand how other industries have evolved, how the housing market has changed, how inward immigration mitigated unemployment and more recent outward migration has been linked to labour shortages. It has also helped me understand more about how we all co-exist and need to work together to make our society more prosperous for everyone.
Seeing how my industry has evolved, I believe that the UK has a thriving economy, and our home-grown innovation, especially technically, offers fantastic opportunities competing throughout the world in a myriad of industries. Domestically there are many challenges. Some of these include housing shortages and re-skilling of workers after the pandemic. In my view, these will be overcome and our economy and society will evolve and provide security for the UK population. I see environmental damage as a major issue and am confident that technology will free us from our reliance on fossil fuels. I fully appreciate that we have one of the most robust banking systems in the world and that the Bank of England ensures the security of our economy. Inflation is over target at present. However, I believe that some of the current price pressure will be alleviated within the next few years and that the Bank can bring inflation below the target of 2%, and that wages will increase too. I also believe that spiralling costs in the factors of production will continue to push prices up, and that these are real issues that will be hard to control in some areas.
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Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.