Whether the UK manages to avoid a technical recession or not in 2008, for many people it will feel like one as their disposable income disappears into higher mortgage payments and (some) prices start to rise sharply – not to mention higher taxes – even if the budget offers more illusory tax “cuts”. Remember also that the people most affected by Brown’s last budget are those earning well below national average.

Considering that economic conditions are not as benign, especially as credit-costs/inflation are predicted to rise (despite/because-of the BoE’s recent interest-rate cut) it would be wise to be cautious. One remembers Master Cavuto on Fox’s business-programme encouraging people to ignore the doomsters about the forth-coming housing-crash…. The rest is – as they say – history (along with many peoples’ credit-record)!

A recession is two consecutive periods of negative growth. Yet most economists (source: The Economist) are predicting 2.0% growth next year. But these two positions are not exclusive. Look back to 1992 and you will find that George Bush Senior had a similar economic climate.

So a recession in the first-half of next year is a possibility, with real-growth picking up in the third/fourth quarter. Anyone looking for a direction should check-out Irish last-quarter growth (-5.5% at an annualised rate)!

The theoretical 90% confidence interval may be +/- 3% (it will depend on the sample size, I haven’t checked) but this is a lower bound on the empirical confidence interval, since the theory depends on it being a truly random sample.

It is one of the most robust findings of behavioural finance that peoples “90% confidence intervals” generally turn out to be 70% (or less) in practice.