There is a bit of a contrast going on in terms of economic evidence. The numbers for the UK/SW economy are all pretty bad – falling real GDP, weaker retail sales, declining construction, manufacturing production still well below previous peaks, and unemployment high and expected to go higher. Similarly, the mood music is worrying – euro-zone debt crises, falling stock markets, a lack of credit for business, modest investment and hiring intentions and ineffective stabilisation policies.
At the same time, some of the surveys and anecdotal evidence speak to a better reality. Several times recently business people have said to me that “it’s better out there than it’s painted in the media”. Businesses have orders and are actively improving their efficiency and chasing new markets. There is still demand for skilled and productive workers.
My conclusion is that both views are right. The aggregate economy is not in a good place and will remain weak for the foreseeable future. Businesses dependent on discretionary spending by consumers and government and the deficit countries of Europe face a difficult outlook. Nevertheless, some businesses, though not yet enough, are seeing an improvement from the previous few years, perhaps not yet back to pre-(first) recession but there is an advance on short term memory and experience in some sectors, especially those selling high value products or services into buoyant export markets.
So, what next? No one has ever been able to predict a turning point in confidence that leads to sustained recovery. We could be there now. Perhaps, the summer’s enthusiasm for anniversaries and sports will help. On the other hand, the risks of further knocks from the external environment remain very high. In the end, SW businesses and communities will turn when the balance of aspiration moves towards action, locally and internationally: action to learn, change and exchange. Trade creates value, jobs and growth. Trade needs confidence about the future. Unfortunately, it will be many, many months before we’ll know whether the turning point was, indeed, summer 2012.