Like many of the best phrases, the inventor of the expression “flat is the new boom” is, sadly, anonymous, because it encapsulates the way many in business feel about the current situation. Things aren’t improving much, in other words, but at least they are not getting worse.
Actually, if you believe the official growth numbers for Britain, things are getting worse, though I think we should take them with a fairly large pinch of salt. Flat is a more accurate way of describing the economy.
The question is whether flat can ever be a sustainable position. People will remember the old bicycle theory. Even Olympic cyclists know that if you do not keep going forward you risk falling off.
That explains the downbeat mood amongst the Richmond Events’ US Business Panel. While four-fifths are either very optimistic (33%) or quite optimistic (48%) about prospects for their own organisation, this optimism is not reflected in views about the wider economic environment.
So only half are very optimistic (7%) or quite optimistic (43%) about the US economy, while none at all are very optimistic about the world and only 18% are quite optimistic.
You can interpret these results in two ways. It is good that the vast majority of US panellists are optimistic about prospects for their organisations, and indeed more optimistic than in the last survey wave. In the end, that is what matters.
If, however, they are downbeat about the wider business and economic environment, that could suggest that this optimism is quite fragile, which one suspects it is.
Autumn is an important time. It sets the tone for business for the rest of the year and into next year, 2013. Given its importance I always think “Fall” is too gloomy a word for Autumn. So what is the prospect?
Cast your mind back a year. August was a dreadful time for markets. Not only was it clear that the eurozone crisis was entering a new and more deadly phase but Standard & Poor’s added to the turmoil by downgrading America’s AAA sovereign debt rating, something we thought no ratings agency would quite dare to do. In Britain, to add to the deep sense of unease, we had riots in London and many other cities.
This time, while progress towards even a “make do and mend” solution to the eurozone crisis has been painfully slow, the mood is not quite so dark. There is a sense that, having stared into the abyss, Europe’s policymakers are aware that they cannot risk falling so far down. So, while Mario Draghi, the European Central Bank president, disappointed the markets with a lack of concrete action when the ECB met in early August, something is on the way, which gives hope that Spain and Italy can avoid going the way of Greece, Portugal and Ireland (though Ireland may be starting to do better).
In America, the loss of the AAA rating a year ago did not produce the devastating negative feedback for the economy many feared but nobody can doubt this has been a lacklustre recovery. The latest employment numbers surprised on the upside, however, after a series of disappointments, and recent economic data have been modestly encouraging. It is not too much to hope that flat can become something more positive in the coming months.
In Britain that is also the case. There is the possibility of an Olympic bounce. We have become used to downbeat official data, even when the business surveys are pointing to growth. There are undoubted pockets of strength in the economy. New car registrations are running ahead of 2011 levels and in July were 9.3% up on a year earlier, with sales to private buyers up 26.4%.
My hope is that this is the harbinger of stronger consumer spending. Consumers have been a drag on recovery, squeezed by high inflation and higher taxes. But the tax increases are behind us and so, one hopes, is the high inflation. As long as they are not scared to death by gloomy headlines, there is reason for cautious optimism.
This is the way it has to be. We hoped by now Britain and other economies would be striding. Instead it is one step at a time.
Maybe, just maybe, by next year there will be a spring in that step.