Nothing gets investment pulses raising like an exciting new issue and in this case…it’s a boy! Clearly any birth is a wondrous event and a royal one gives joy to the nation. So much so that some economists have been trumpeting the impact which it could have on the UK economy. Estimates vary between £200m and £400m. That even tops my own experience of parenthood, although I made savings by not buying the latest ‘Bugaboo’.
Most of the estimated boost to growth will come from extra familial celebrations (wetting HRH’s head), memorabilia (tea towels et al) and tourism. Some context is useful here though. In the first quarter of this year household expenditure is estimated to have been £254bn so 600 times the most bullish baby-boom forecast.
|Source: Brewin Dolphin/ONS|
Economics is useful when investing. We need to know for example if Chinese growth is likely to be accelerating decelerating or reversing. But we have to recognise that precision is not its strong point. One of the trappings of behavioural finance is overconfidence and to overcome it we have to be able to discern between forecasts and stabs in the dark.
Regular readers will know we think that UK growth prospects are looking a little brighter at the moment, and we certainly believe the royal birth is a very happy occasion, but we should be wary when newspapers trumpet benefits which are based on suspect foundations!