There is evidence that what lies ahead may not be as grim as we are being constantly told it will be, says Bill Jamieson
Right to the end, 2016 has been a year of global shocks and trauma. Outcomes that we were assured would not come to pass did exactly that: Brexit and Trump being the two outstanding examples.
And these events have played out against a background of murderous conflict in the Middle East and horrific terrorist attacks across Europe: Nice, Brussels and now an appalling slaughter in a Christmas market at the heart of Berlin which killed 12.
It all seems like a world increasingly unhinged. And it is hard not to feel anything but utter pessimism as to what lies ahead. Few doubt that more terrorist atrocities will follow.
And across the economy and business, the mood is no less apprehensive.
Central banks are softening us up for interest rate rises in the New Year to combat an expected rise in inflation. And here at home there is a near uniform unease about the future. For months we have been bombarded with gloomy economic forecasts, growth downgrades and fears over a slump in business investment, if not outright exodus.
Christmas 2016 looks to be game, set and match for the pessimists. The outlook seems barely any better than it was in late 2008 when the global banking crisis brought forth a wave of scary premonitions of private sector collapse, the end of capitalism and the onset of years of record unemployment and social misery.
And yet… amid all the fears and forebodings, here’s a strange thing.
Financial markets this winter have not gone into meltdown. Investors are not fleeing to the hills. The big story on the business pages in recent days has been the surge in stock markets, here and in America, to new highs.
In New York the Dow Jones Industrial Average has surged by more than 4,000 points or 27 per cent since its low in February to more than 19,900 – an all-time high.
The unlikely Presidential election victory of Donald Trump has acted, not as a brake but an accelerant. Traders confidently expect the 20,000 barrier to be breached before long.
Over here, the FTSE100 Index of leading shares has breached 7000, up by 600 points or 18 per cent since the morning of 24 June when the Brexit vote unleashed a storm of apprehension and foreboding.
Why should stock market fluctuations matter?
They are surely nothing but the churning froth on a boiling sea.
These momentary sprays blind us to the murderous currents beneath. They are irrelevant for the great mass of cash-strapped households and the Just About Managing.
And there are few things more fickle than the mood of a market: today’s relief rally can prove no more than a platform for tomorrow’s high dive.
Yet for millions who are reliant on pension savings or who are saving through Individual Savings Accounts (ISAs), the failure of the market to conform to the dire premonitions of decline repeated ad nauseam during the EU referendum offers some consolation as values have risen - just when a sharp decline was thought likely.
And it also signals a striking counter-factual to the many warnings of a collapse in business confidence. Were worries over our Brexit feature so pronounced, then the equity market, a rough and ready barometer of business performance 12 to 18 months ahead, would now be much lower than the level pre-Brexit as prices reflected investor concerns over the coming downturn.
Yet prices have moved in the opposite direction.
Nor is the stock market the only counter-factual to the occult of pessimism. Average earnings growth, helped by near record levels of numbers in work, rose 2.5 per cent in the three months to October – 1.6 percentage points above the rate of inflation for that period. Government tax receipts have continued on a slightly upward trend since May.
VAT payments are up by 4.4 per cent year-on-year in November and Corporation Tax receipts by almost 23 per cent.
We were besieged with warnings of an investment pull-out.
Yet recent weeks have seen announcements of business and investment commitments in the UK by top flight global companies such as Google, Facebook, Apple, Boeing and Nissan. And this week the German supermarket giant Lidl announced a major commitment to the UK with 5000 new jobs and a new UK HQ. Clearly Lidl seems to have more confidence about prospects than First Minister Nicola Sturgeon, wont to give the impression that only continuing membership of the Single Market offers an economic lifeline of any worth.
Now it’s understandable that UK companies exporting to Europe are apprehensive about the future trade arrangements and the effects of a lower pound on import costs.
But here, too, there is a counter-factual: exports are experiencing a fillip and the visitor and tourism sectors expect an uplift. As for household spending, far from shrinking in expectation of lean times ahead, this, too, has also defied economists’ warnings. Figures last week showed UK retail sales figures rose 5.9 per cent by volume last month, this on the back of a 7.2 per cent surge in October.
And the latest CBI Distributive Trades Survey reported the balance of retailers reporting a year-on-year increase in retail sales volumes climbed to a 15-month high of plus 35 per cent in December from plus 26 per cent in November. The strength was widespread this month, with decent gains for clothing, hardware & DIY and grocers.
Internet sales were also reported strong, clearly benefiting from Black Friday related sales increasingly being done over the internet.
What of the heartland economy?
A robust overall December CBI survey suggests that the manufacturing sector is ending 2016 relatively well.
It showed that total manufacturing orders rose at the fastest rate for 20 months in December and at a well-above average rate.
A balance of 19 per cent of manufacturers reported an increase in production over the past three months, the best reading since mid-2014. Only 4 out of 18 sectors reported a drop in output.
Here in Scotland confidence amongst Scottish construction employers has held steady at Plus Two during the last three months of the year, the same level recorded during the previous quarter, according to the latest Scottish Construction Monitor, a quarterly survey of the Scottish Building Federation.
This is the second consecutive quarter during which the overall confidence of the industry has been rated positive after a slump in confidence to Minus 19 at the end of June, immediately following the UK referendum vote to leave the EU.
Finally, even the lugubrious Fraser of Allander Institute has lifted its gloomy forecasts from GDP growth in Scotland of just 0.5 per cent in 2017 to 1.1 per cent – still well below the OBR estimates for the UK but a notable uplift nonetheless.
For the moment, however, misaberalism abounds about the year ahead. But in truth there is reason to believe the future may not be as bleak as we are being constantly warned. Looking in more detail at the picture - and we may even dare to hope.