Clash of the Titans III

Supported by PwC


Competition Entry – Click Here to Enter

Every year, the Economic Research Council invites three economic professionals to give their forecasts for the UK economy in the coming year, at the annual Clash of the Titans competition (to be held this year on the 10th December). 

But we also want to hear your economic predictions for 2014.  Do you think you can do better than our experts? Fill out the form below between now and December 20th, and if your forecast is the closest to reality, you’ll win a case of Royal Tokaji wine (or equivalent prize for under-18s/non-drinkers).  Second and third place win a £50 and a £20 Amazon voucher respectively.


This year, we will also be awarding a £20 Amazon gift voucher to three random entries, to be announced at the next ERC event on the 9th January.


Read on for more information about the six categories we are asking for your predictions in, including some expert guidance from Andrew Sentance, Senior Economic Adviser at PwC and former member of the Monetary Policy Committee (MPC), who will be challenging our three Titans on the 10th December.

Or alternatively, skip straight to the entry form.

Gross Domestic Product (GDP)

GDP is a measure of total output, and is generally considered to be the main indicator of the health of an economy. More specifically, we are after the percentage change in total GDP compared to the previous quarter.  This number can be negative as well as positive (a recession is defined as two consecutive quarters of negative GDP growth).  On a quarterly basis, it tends to range between -2% and +2%, although it could be more or less than that.

Andrew Sentance says: “The UK economy has gone from zero to hero during 2013, and forecasts for 2014 are being rapidly uprated. But there are still potential drags on growth – from the sluggish Eurozone, squeezed household incomes and subdued investment. In the context of the New Normal for western economic growth, a 2.5% rise in GDP over the whole year would be an impressive performance from the UK economy in 2014 – even though this would be modest growth by pre-financial crisis benchmarks.”

Inflation Rate

The measure of inflation that we are looking for here is the percentage change of the Consumer Price Index (CPI), which measures the rate of growth of the price of a bundle of goods and services, on the same quarter the previous year.  This can in theory be negative (referred to as deflation), but has been positive in recent history.  Over the past five years it has ranged between 2.1% and 4.7%.

Andrew Sentance says: “Inflation has fallen towards the end of 2013, but it has not yet reached the 2% target and has averaged close to 3.5% since 2010. With the economy picking up at home and abroad, some of the favourable influences on inflation – subdued wage growth and falling petrol prices – may start to unwind. I would still expect UK inflation to run above the 2% target and this will continue to be a dampener on consumer spending growth.”

Unemployment Rate

The unemployment rate is the percentage of people over the age of 16 who want a job but do not currently have one.  It does not include people who are not currently looking for a job for any reason.  As it is a proportion of a population, it can not be negative, and has ranged between 7.1% and 8.4% over the past five years.  High GDP growth should lead to falling rates of unemployment as more people are employed in providing goods and services, but this link has not been evident recently as unemployment fell during the most recent recession.

Andrew Sentance says: “The unemployment rate has become a key economic variable of interest under the new Bank of England framework for forward guidance. A drop to 7% or below next year would prompt a review of the policy of keeping interest rates on hold at 0.5%. And if economic growth continues to gather momentum, it would not be surprising to see the 7% rate breached over the next twelve months.”

Average Earnings

The rate at which earnings grow, especially compared to general price inflation, plays a key role in how people feel about the economy.  With this measure, we are looking for the percentage growth of the 3 month average of weekly earnings on the same quarter in the previous year.  Although there is a lot of variation between earnings across different sectors, we are looking for the average for the whole economy, excluding bonus payments and arrears.  It would be very unusual, although possible, for this to be negative; it has generally ranged between 0.5% and 2.5% over the past few years, slowing down more recently.

Andrew Sentance says: “Official measures of wage increases have been remarkably subdued over this recovery – running consistently below inflation despite signs of quite healthy employment growth. Such low rates of wage growth may not be sustainable if growth picks up and labour markets tighten. Wage increases in some sectors of the economy – such as retailing, hotels and restaurants – are already running at 3-4% a year, compared to around 1% across the private sector as a whole.”

Interest Rate

The Bank of England sets the official Bank Rate (the rate of interest at which banks can borrow from the central bank) every month, and this in turn should affect commercial interest rates.  Generally the bank likes to alter the interest rate by +/- 0.5 percentage points each time, although for the purposes of this competition, we take a three month average, so it needn’t be a multiple of 0.5.  The Bank Rate has been kept at 0.5% since the beginning of 2009.  Interest rates are used as a tool to control inflation, and the Bank of England have been set a specific target of keeping the CPI rate at 2%.  In theory, if inflation rises above 2%, the interest rate should be increased to push it down, and if it falls below, the interest rate should fall.  However, high interest rates also have a negative effect on GDP growth, and it is unlikely that the interest rate will rise while GDP growth is low.

This year, the new Governor of the Bank of England, Mark Carney, has issued guidance that if unemployment should fall below 7%, they will consider raising interest rates, but they won’t do so before then.  If you think unemployment will fall this year, then an interest rate rise is a distinct possibility.

Andrew Sentance says: “Since 2011, there have been no votes for higher interest rates on the MPC. 2014 could be the year when this changes if the Bank’s own economic forecasts are correct. The Bank of England faces a major challenge raising official UK interest rates from the lowest level in recorded history. There is likely to be no ideal time to do this. But if the growth outlook continues to improve, the MPC may decide it is time to start a gradual and controlled rise in interest rates, to avoid a sharper hike in the future.”

S&P 500

The tie-breaker this year is the highest point that the US S&P 500 stock index will reach in 2014, to the nearest whole number.  The S&P 500 is an index measuring the performance of shares of the top 500 companies listed on the US stock market.  This is a very difficult thing to predict accurately, which is why we’ve chosen it as the deciding factor in case of ties.  It generally rises every year, and even if you think there will be a crash in the market next year, the highest point is still not likely to be much below this year’s high point (unless there is a crash between now and January).


Good luck!

Previous Data

  Q4 ’10 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q2 ’12 Q3 ’12 Q4 ’12 Q1 ’13 Q2 ’13 Q3 ’13
GDP 0.2 0.5 0.1 0.6 -0.1 0 -0.5 0.6 -0.3 0.4 0.7 0.8
Inflation 3.4 4.1 4.4 4.7 4.7 3.5 2.7 2.4 2.7 2.8 2.7 2.7
Unemployment 7.8 7.8 7.9 8.3 8.4 8.2 8.0 7.8 7.8 7.8 7.8 7.6
Interest Rates 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Earnings 2.1 2.3 1.7 1.9 1.6 1.8 1.8 1.3 0.8 1.1 0.8
S&P 500 High   1364 1466 1798



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