Bill Jamieson: There may be storm clouds ahead…

There is an annual news item that appears without fail in newspapers: the naming of the most depressing day of the year. Normally this falls on the last Monday in January. But not this year. For 2012, the combination of endless rain, interminable grey skies and miserable economic news propelled yesterday, 18 July, into the super league of misery.

The weather and the bad news we can take – in bursts. It is the absence of any break, the sense of there being no end to this misery, that has plunged the country into one of its deepest ever peacetime depressions. Who needs to worry about meeting the statistical definition of recession when this is the psychological state in which the country has been entrapped for months?

It comforted me to think that before reaching for that elixir called fiscal stimulus, it was always best to check on those natural reserves within economies. Like the human body, our economic system, no matter how sophisticated and impersonal it purports to be, has its own natural reserves of valium and Champagne. The problem, of course, is that we grab the Champagne when it’s the valium we need, and vice versa. This is what explains those periods of mania and depression, the booms and busts that comprise the business cycle. Bankers and economists and finance ministers purport to be above the cycle, impervious to the swings of mood that overwhelm the mass. In truth, they are more often to be found in the advance guard of these tidal surges, amplifiers of the very forces they so disdain and condemn in others.

The extreme of despair is as absurd and irrational as that of elation, and each at the time is capable of being rationalised as objective and impersonal fact. In truth, our situation is always more complex and diamantine than our subjective feelings allow. Reality is filtered to dramatise and exaggerate our condition. Our good fortune we of course ascribe to rational human action, our superior intellect and judgment and our superbly accurate predictive abilities. Misfortune is the visitation of the external and absurd.

I will demonstrate this by simply setting out reasons to be hopeful at this time. They are grounded in reality and in fact. That we choose to downplay or ignore them is an example of the abnormal thinking that drives us today to despair. We know the condition does not last but still resolutely set about our daily business on the basis that the condition is permanent and has no end, even though experience teaches us the opposite is the case.

Let’s imagine that we are economic historians, charged a decade or so from now with summarising our condition in the summer of 2012. Such an essay would begin with reference to the worst weather for this time of year experienced in living memory. And we would certainly make early reference to the relapse into double-dip recession, some three years after those impersonal economists at the “independent” Office for Budget Responsibility and the Bank of England had confidently pronounced that we would by now be well into a recovery, with falling unemployment and a shrinking budget deficit. It has certainly not turned out anything like the way that the predictive “science” of economics led us to think.

But this would not blind the historian to features of our condition that do not figure in the daily news, or in the nightly Armageddon sing song with which the BBC’s Robert Peston sends us to our beds. That detached historian would make note of the following that we have, for reasons more to do with our black depression, opted to ignore.

A starting point might be the remarkable fall in the price of oil in recent weeks. Yes, that’s the price of oil that had us wailing and gnashing at the petrol pumps and wringing our hands at the economic ruination it would bring. I am grateful to the economist Tony Mackay for the following. Brent crude fell 3 per cent last month. The monthly average was $95.95, which was 15 per cent lower than the $110.13 average in May. Prices traded between $100.74 and $89.77, the first fall below $100 since January 2011. Cheaper oil is good news.

The fall in oil has also helped to push the rate of inflation down from 2.8 per cent in May to  2.4 per cent in June, the slowest rate of increase since the end of 2009. Lower inflation eases the pressure on household budgets.

The historian would also take note of some business developments in recent weeks that are relevant but which have not made the nightly news headlines. French concern Teleperformance is opening a fifth contact centre in Scotland that will employ about 450 people. Engineering group ABB is planning to create 120 jobs in Scotland as part of a growth strategy. Mitie has won a  £30 million contract to look after 80 buildings in Scotland. A £10m loan fund designed to kick-start stalled housing projects has awarded funding to three projects. Asda is to open a £20m supermarket in Barrhead. Carr’s is to invest £17m in a new, state-of-the-art flour mill in Kirkcaldy. Charlotte House in Queen Street in Glasgow’s city centre is to become a 171-bedroom hotel.

In the “stricken” financial services sector, investment management group Black Rock is moving to new offices in Edinburgh’s Exchange Place, doubling its existing floor space of 40,000sq ft in what marks the biggest city centre letting of a speculative development for almost a decade. Oh, and new car sales were up 9 per cent in June and airport passenger numbers were up 3.5 per cent.

Looking at the miserable GDP numbers, the historian would note that within them the services sector grew by 0.2 per cent and total production in the production sector was up by 1.2 per cent, within which manufacturing was up by  0.9 per cent – not quite the picture of unrelieved gloom.

As for those dismal labour market numbers, unemployment in Scotland fell by 4,000 between March and May and the numbers of people in work in Scotland rose to 2,493,000. One of the reasons behind this resilience in employment is that, according to Ernst & Young, 5,926 jobs were created in Scotland through overseas investment last year, up  50 per cent on 2010.

I do not mean to diminish in any way the challenges that we face, or to offer some Panglossian view of our prospects, but to point out, as a detached historian surely would, that we are not trapped in a headlong downward spiral and that even in this bleakest of summers, there is cause for hope.

The problems we face are not specific and particular to Scotland but are shared – and often to a more intense degree – by other neighbouring economies. The gloom is not as unrelieved as we think or our prospects without hope, given the likelihood that in the autumn there will be yet more quantitative easing – and more policy changes. When at the bottom of the cycle and in the pit of despair there is nothing more cathartic than throwing in everything – and then the kitchen sink. Such is the mood we are in. Just don’t confuse it with “objective” economics.