NEVER one to pass up the opportunity of employing a useful cliché, I have lost count of the times I have used “a year of two halves” to describe the preceding 12 months. But now, just when I have worn it out, the expression seems more apt than ever.

Cast your mind back to the first half of the year, and the exuberance was tangible. Every day, it seemed, there was a new private-equity deal. The economy was booming and so were house prices. The governor of the Bank of England was forced to write an open letter explaining why inflation had risen above 3%. He and the rest of the monetary policy committee (MPC), desperate to control this bucking bronco of an economy, raised interest rates from 4.5% to 5.75% and promised more. The last of those increases came, appropriately enough, in early July, just after the middle of the year.

Then the wind changed. It was not quite a Michael Fish moment for King, but his insistence on August 8 that there was no international financial crisis was followed on August 9 by the equivalent of a hurricane in the money markets.

Since then, of course, it has been a question of watching and waiting. Most of the economic data, it should be said, have continued on the strong side, including perky figures for November retail sales on both sides of the Atlantic. But the surveys have suggested weaker growth ahead and so has a sharp drop in business and consumer confidence. The housing market has been notably weak and appears to have felt the impact of the credit crunch most intensely, coupled as it was with the introduction of home information packs (Hips).

At first it seemed as though the eye of the storm had passed quickly, and money markets began to return to normal in October. But a second gust followed, to which central banks were obliged to respond.

So who got the economy right? The answer, in important respects, is nobody. There were people who worried about losses on sub-prime lending in the United States. There were those who were concerned that the Bank and other central banks were raising rates more than was necessary. I drew the line at the last of the MPC’s rate hikes.

But nobody, to my knowledge, predicted that the sub-prime crisis would spread as it did, forcing central banks into unprecedented action to support the markets, forcing some of them to reverse previous rate rises and forcing Northern Rock into the unwilling arms of the Bank of England. The story of the economy in 2007 was not in the numbers but in the drama of real-life events.

In terms of the numbers, forecasters were too downbeat about Britain’s growth prospects this year, something to bear in mind perhaps when assessing some of the direr warnings for 2008. Economists did better on inflation, predicting it would get back to 2%, having been above it.

Even so, the consensus was that the Bank would not have to raise rates as much as it did. Most Bank rate forecasts for the year-end were clustered around 5%. Unemployment was expected to rise rather than fall.

The recent bombshell announcement from the Office for National Statistics that the current-account deficit in the third quarter was £20 billion also ruined quite a few forecasts. Although the numbers will probably be revised, it is hard at present to come up with a number of less than £60 billion for the full-year deficit for 2007. That is a lot of red ink, roughly double the average forecast made at the beginning of the year.

It is an ill wind, however, that blows nobody any good. The only economist who got close to my guess for what would happen to the balance of payments deficit was Michael Saunders of Citi, who predicted £56.9 billion.

Saunders, a previous winner of my annual forecasting competition, was also more optimistic than most on growth (2.9%), close on inflation (2%), and predicted a fourth-quarter Bank rate average of 5.4%. The only one he got wrong was unemployment. But a score of 9 out of 10 was a very creditable performance, and he deservedly tops the table again.

Speaking of 2008, he said recently: “The UK has probably been the fastest growing country in the G7 this year but is likely to have the sharpest slowdown among G7 countries in 2008.”

Congratulations also to Peter Spencer at the Ernst & Young Item Club, and to JP Morgan and the others who got close.

How did I do? I was a little too low on growth, 2.6%, and thus too high on unemployment, 1m; okay on inflation, 2%, but my prediction of a £40 billion current-account deficit was not gloomy enough. I suggested Bank rate might rise and fall, but to 5.5% and 5% respectively. I would have scored seven out of 10.

I am always accused of being too optimistic about house prices, but this year, as for the past couple of years, the rise exceeded my expectations, certainly in the early part of the year. I thought house prices would rise 5% in 2007 as a whole, with most of the strength concentrated in the first half. That will not be too far out but is probably still a little on the low side.

In looking at the forecasting record for 2007, however, I also have to give a large bouquet to the Treasury. It can never get top marks in my forecasting league table because it does not make predictions of interest rates (because this would be seen as second-guessing the Bank) or unemployment (because it could be politically difficult openly to predict a rise).

But in a year when every independent forecaster was too gloomy about growth, the Treasury’s optimism came good, having the only forecast (2.75% to 3.25%) with a three in front of it. By sticking with its convention of predicting that inflation will always gravitate towards the government’s 2% target, the Treasury got that one right, too.

For 2008 the Treasury is expecting 2% to 2.5% growth and, as before, 2% inflation, on the optimistic side of the consensus. Let us see if its luck lasts. More next week on the 2008 outlook and the chances of a Bank rate cut in January.

PS: I hope that those who have not already done so are beavering away on the Christmas quiz, published here last week, and available online for those who missed it. In the meantime, let me offer you an end-of-year insight into the most popular subjects in this column, as defined by the response from readers.

I have hinted before that readers can be relied on to reply robustly on a range of subjects. Some appear a little taken aback when I respond in similar vein. One of my frustrations is not always being able to respond to the strange criticisms that sometimes appear out there in the zany world of the internet.

Anyway, here are my top 10 reader-response subjects for 2007. 1. House prices – no surprise there. After a period of hibernation, the bears have wandered out of the woods again. 2. Gordon Brown’s economic record. 3. Inflation, and whether you can believe the official figures. 4. Immigration and the economy. 5. The Bank of England and whether it is (a) ignoring the pain out there in the real economy or (b) ignoring its duty to keep inflation under control. 6. Tax and, over the past few weeks, Alistair Darling’s capital-gains-tax reforms. 7. The rise of China and India. 8. Northern Rock. 9. Britain’s gaping trade gap, what it might mean for the pound and the decline of UK manufacturing. 10. Oil prices and “peak” oil.

Keep the responses coming.

david.smith@sunday-times.co.uk

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