It is easy to get depressed about the economic state we are all in. Business opinion surveys continue to plumb their own historic depths.
IT is easy to get depressed about the economic state we are all in. Business opinion surveys continue to plumb their own historic depths. Since the new year started, the latest Lloyds TSB monitor of the Scottish economy and the CIPS surveys of manufacturing and construction across the UK as a whole have all produced readings as low as they have ever been before.
With a steady stream of well-known consumer brand names - from Adams to Zavvi, with Woolworths and Wedgewood thrown in - succumbing to insolvency and the prime minister appearing to concede on the Andrew Marr Show on Sunday morning that recession could be with us for the next two years, things look relentlessly bleak.
Across the Atlantic, just days before Barack Obama becomes the 44th president of the United States, the distinguished economist and Nobel Prize winner, Paul Krugman, is openly confessing his fears the economy there is heading for "Great Depression II".
Central banks are fast running out of monetary ammunition. The battered commercial banking system seems to be angling for even more billions before it will feel comfortable lending again. From Washington to Berlin, the scale of stimulus packages thought by governments necessary to shock whole economies back into life seems to grow and grow.
Dark days indeed. And yet admidst all the midwinter gloom, there are some tentative flickers of light. The first post-Christmas signals from open-for-business retailers, like the John Lewis Partnership and Liberty, are surprisingly encouraging.
Footfall is up, as anyone who has ventured out to the sales might well testify. John Lewis had a strong Christmas week, especially in its Waitrose supermarket division. The farmer we bought our turkey from sold seven times as many birds this year as he did in 2006.
Stock markets, after the double-digit drubbing they have almost all experienced in the past year, are showing some traces of renewed vigour. There is even talk, in the Buttonwood column in the latest edition of The Economist, of some kind of rally on Wall Street this year.
I filled up with petrol on my way to work on New Year's morning at 82.9p a litre, nearly a third down on what we were all paying at peak last year. The Ernst & Young ITEM Club thinks plummeting global oil prices could boost UK growth by a cumulative 1% or more, this year and next, if the crude price stays around current levels and the impact of that feeds through into lower production costs and reduced consumer prices. And, finally, the precipitous fall in sterling, especially against the euro, has stabilised and even begun to unwind a little in recent days. What looked like a one-way bet - thanks to the particularly parlous state of the UK economy, we were told - now looks rather less clear-cut. That trip to mainland Europe may not be entirely out of the question in 2009.
These are, as I said earlier, tentative flickers of light. The year-end spending spree may, as some analysts are already arguing, prove short-lived. The scale of discounting on offer, even before the sales proper started, was bound to drum up some kind of consumer reaction. All that footfall and stock-shifting may well be at the expense of margins. But as my farmer's example shows, a good word-of-mouth service can do wonders for demand, even when times are tough.
Any stock market bounce could also prove short-lived. And as the ITEM analysis warns, the plunging oil price, if sustained, could "spark deflation that will further damage a global economy that is already stumbling into 2009".
That said, as Buttonwood points out, two of the best years for Wall Street in the last century were 1933 and 1935, after the Great Crash and right in the middle of Great Depression I. And London's stock market more than doubled in 1975, when the UK Labour government was wrestling with soaring unemployment and heading towards the miseries of the Winter of Discontent.
In addition, Merrill Lynch has just produced a Welcome to 2009 global analysis which points out that when the global economy suffers a cardiac arrest - a massive downside spike in output - it has more often than not, in the past, been followed by a rebound. "Bungee jumping is the typical pattern of economies," argues the note, pointing out that, following a quarter of plunging output, the probability of growth returning to positive territory over the next four quarters is greater than 50% in all of them.
In its sample covering the US, the UK and Germany, Merrill Lynch found only one instance in 48 episodes where all four falling quarters ended up negative. That was in the UK in 1980. So if, when the numbers finally appear, the contraction in GDP in the final quarter of 2008 is thumpingly bad, history suggests an early rebound is entirely possible. Two whole years in the economic doldrums is not yet inevitable.
