Saturday, 6 November 2010

The Economic Tide Turns...

Saturday and Mrs Stodge drags me to Lakeside for a day's Christmas shopping and it's a salutary experience for those thinking we are on the cusp of another recession with consumer confidence in tatters.

The shops and restaurants were jammed, people were spending and the number of empty units had been cut to almost zero. This may not have been a return to the boom times of the early noughties but was far removed from the recessionary gloom of 2008-09.

Today's anecdotal data and a far more significant raft of meaningful statistics illustrate an economy recovering well and starting to grow strongly. It's more than likely that the coming spending cuts will take the edge off this recovery and that may be no bad thing as inflation rather than deflation is the real risk. Talk of double-dip recession is wide of the mark and those who argue that interest rates may have to rise sooner rather than later may have a point.

The recession of the early 90s was particularly tough for those with mortgages with interest rates stubbornly high while savers did well. This time, it's the complete opposite and it's the mortgage-paying families who are doing best - indeed, if you have a mortgage and secure employment, you'd hardly think there was a recession at all. Mortgage payments have been slashed and the astute have been paying off their debt securing their medium to long-term financial future. For savers, and this includes many of the elderly, it's been a tough time with income slashed with interest rates.

The Coalition will be the beneficiary of the return of optimism and confidence though to be fair Labour would have done something similar had they still been in Government. Labour and other anti-Coalition elements have been hoping for economic malaise as a way of breaking the Government and splitting the parties but it will be the return of growth which will end Labour's prospects of returning to power.

Indeed, I am now confident that while there will be short-term unpopularity for the Coalition, opposition elements had better enjoy it - the medium to long term prospects for the Government are very good and re-election in 2015 looks to me to be a near certainty.

Yes, external events could change all this but today has shown me that the worst of the recession is over and while the spending cuts will have an impact, the longer-term prospects for growth are good and if current conditions are maintained, the Coalition will look much stronger by 2013-14 and Labour's position of kneejerk oppositionalism much weaker.

No comments: