Consumer confidence might have nosedived, but is this a reflection of facts or scaremongering?
More than ever, the thought that perception is reality has struck me. Let me explain why.
Now is the time that we construct our business plan for next year and beyond. To support that process, we talk to external specialists including economists.
Recently, Ross Walker, the able RBS economist, gave us his views. They were broadly in line with consensus, which predicts that economic growth will slow next year to 1 to 2 per cent; that the interest rate will fall to 4.5 per cent and that inflation will fall to between 3 and 4 per cent. Unemployment will rise, but not close to 1992 levels, and the housing market will fall more as demand outstrips supply.
So yes, the going will be tougher, but we will probably not go into recession and the climate will not be as difficult as those we managed through in the early 1980s and 1990s.
Yet the most telling chart that Walker presented was on the misery and confidence index. The chart’s line setting out the financial position of families shows little change over several years, but the confidence line – the measure of how people feel – is at its lowest since the 1992 recession and the two lines have violently diverged over the past three months. Why?
To date, there is no real parallel between now and then. Back then, we had 15 per cent interest rates – now 5 per cent – and 3.2 million unemployed, now less than half that.
There has been a spike in oil and food inflation and, as a result, consumers have less disposable income, but the effect of that should level out over the next 12 months. Inflation is nowhere near the level of the early 1990s. Lehman Brothers forecasts that oil prices have peaked and will be back down to US$90 (£48) a barrel by spring next year.
So what is going on; what is different to 1992? Cycles are speeding up as everyone is more wired in. We have become more hedonistic as a society, spending more on experiences and feasting on misfortune as a way of elevating what we have.
The internet and 24-hour news have a voracious appetite and, in a battle for eyeballs, are prone to overstate the case. The simple truth is that bad news outsells good.
At a time when some media editors and owners are looking for political change, siren voices are even more amplified. All my recent meetings with popular journalists convince me there is only one story their editors are interested in – recession.
The Government is not doing enough to accentuate the positive and the opposition have no good reason to help. Where does that leave a simple grocer planning for the year ahead?
It leaves us planning for the worst, but hoping that the tidal wave of economic depression soon breaks on the rocks of common sense. This is perhaps helped by the reality that media owners watching ad revenues plummet, as businesses dependent on consumer spending cut back, will decide that, for once, the economics of good news outweighs bad.
Mark Price is managing director of Waitrose