Most of the measures in the Autumn Statement had been preannounced, are small in scale and will have limited macroeconomic impact. The main “news” is in the updated Office for Budget Responsibility (OBR) projections. The OBR has refused to endorse the Chancellor’s bullishness, arguing that recent economic and fiscal improvement is entirely cyclical, while growth will slow significantly in 2014. Mr. Osborne will be hoping that its latest forecasts are as unreliable as those made in March.

The OBR grudgingly accepts that the economy has expanded by 2.6% in the year to the fourth quarter of 2013, far ahead of its 1.0% March projection. In contrast to other forecasters, however, it does not believe that stronger momentum will carry over into next year. The OBR maintains its prior assumption of quarterly growth of 0.5% during 2014. This implies that the annual GDP increase will peak at 2.7% in the first quarter and slow to 2.0% by year-end.

The OBR will have further disappointed the Chancellor by ascribing the 2013 growth surprise entirely to cyclical strength, with no contribution from better supply-side performance. With its estimates of productive potential little changed, the negative “output gap” (i.e. the shortfall of actual GDP relative to potential) is judged to have narrowed to 2.2% in the third quarter – below the average estimate of other forecasters. This, in turn, means that the structural budget deficit forecasts are no better – in fact, slightly worse – than in March, despite falling headline borrowing.

The OBR’s bottom line, therefore, is that the Chancellor is doing just enough to meet his “medium-term fiscal mandate” of balancing the cyclically-adjusted current budget five years ahead but has no scope for “giveaways” before the 2015 election. Economic news, moreover, will become less favourable in the run-in to the election, with growth slowing and unemployment levelling off at 7%.

The assessment here is that the OBR is underestimating 2014 growth but overestimating the output gap. Its two formal methods for calculating the gap, indeed, give an average result of 1.3% for the third quarter –  this has been overridden by “judgement” to arrive at 2.2%. The key pre-election economic risk for the government, therefore, is rising inflation and an early interest rate hike rather than slowing growth. A smaller output gap, of course, also implies that the structural budget deficit is larger than the OBR estimates – fiscal healing, in reality, has barely begun.