Are we there yet?


Now that we have notched up the sixth anniversary of the queues outside the Northern Rock, it would be nice to think that the end of this recession is in sight. After all, the world and his wife are pointing to all sorts of , economic indicators to suggest that whilst we might not be quite out of the woods yet, we are finally getting there. The government is telling us that things are improving, but with only 600 days to go to the next election, it would, wouldn’t it?

Should we believe them?

My window onto the economic world is really the housing and savings markets and looking at those sectors I can feel quite schizophrenic about the way things are going. There is the much-vaunted “house price boom” which may be a reality in posh parts of London, but would seem to be a media hallucination outside the southern part of England. Sure, there is a welcome recovery of sorts in the housing market, and that is a hugely positive sign. But let us remember that whatever improvement is under way in the housing market has been jump- started by the squillions of pounds being pumped into the government’s Funding for Lending and Help to Buy schemes and interest rates at their lowest ever. It’s now four and a half years, no less, that the Bank of England Base rate has been sat at what was previously the unthinkably low rate of 0.5%. A huge price to pay to prevent meltdown in the housing market.

And sadly, but inevitably, the price is being paid by savers, who have seen returns shrivel in recent years. We have done all we can to shield our savers from the worst of the collapse of savings rates as a matter of principle and but we recognise that times have been very tough indeed for them.

We now have the benefit of “forward guidance” from the new Governor of the Bank of England who sees the maintenance of ultra-low interest rates for at least a couple of years yet whilst unemployment is so high. So no let up for savers any time soon, I’m afraid.

And then comes the big gamble; what happens when the government withdraws support for the economy and interest rates rise? Every time the Americans talk about even a small portion of cold turkey, the stock market goes wobbly at the thought of it.

Amongst this heavy talk of confusing economic indicators, there are, of course, other much lighter-hearted signs of improvement in the economy that people look to. I haven’t studied hemlines recently and I’m not even sure that the well-worn adage of rising hemlines signifying improving times is quite as reliable as it once was. Rather, I’m informed by people who know this stuff, that the current increase in the wearing of “kitten heels” rather than high heels by women is a sure sign that things are on the up, although I wouldn’t recognise a kitten heel if it stood on my toe. In hard times, it is well known that people opt for small treats rather than expensive luxuries and I do have an instinct that the cupcake boom is coming to an end. But does that just mean we’ve got tired of cupcakes and the current meringue boom is just another version of the same thing? Somebody in New York has suggested that the rise in the number of attractive waitresses is a sure sign of a recession, as in better times these people are more gainfully employed in modelling, advertising and the like.

My own proxy for the state of the economy is how many unsold cars you see in that vast car park you see as you go over the Avon on the M5 (Answer: a lot less than a year ago, but for all I know they just shifted them somewhere else to make us all feel better!) .

Truth be told, these fun indicators of the economy don’t seem to offer us any more clarity than the heavy stuff.

At the risk of sounding a little like Vince Cable, I have a real sense that we might be a long way yet from being out of the woods. Perhaps we are just approaching a pre-election clearing. But boy, it’s nice to see daylight again!

Dick Jenkins

In Economy


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