“Forecasters’ droop” is the tendency of economists to predict that a stronger-than-expected data series will fall back to “trend”, despite a lack of catalysts for such a development. The MPC appears to have contracted the disease, judging from the expectation reported in the July minutes of “GDP growing by 0.9% in Q2, before slowing modestly into the third and fourth quarters”.

Rather than slow, growth is likely to remain robust and may even rise further in the second half, for three reasons. First, the global economy is picking up at mid-year, as foreshadowed in posts extending back to February. Today’s stronger “flash” PMI readings for July for China and the Eurozone are further confirmation of a revival. This is boosting exports, despite a firm pound: expected foreign orders were at a 19-year high in the July CBI industrial trends survey released earlier this week – see chart*.

Secondly, real narrow money expansion – the only indicator to give early warning of economic strength in 2013-14 – remained stable and strong in May, the latest available month. Broad money growth has also been steady while bank credit has started to rise. Monetary trends lead the economy by about six months; no slowdown is signalled before end-2014 at the earliest.

Thirdly, monetary conditions have eased further during the first half, reflecting a continued decline in average interest rates on bank lending and deposits – see Monday’s post. This could lead to additional strength in monetary data, in turn signalling faster, not slower, economic growth. June money numbers are reported on 29 July.

*Seasonally adjusted data.