Clouds gather for the perfect economic storm
There’s no doubt that the West Midlands has gone down with a bad bout of the economic jitters.
In fact, according to a colourful “confidence barometer” published by Nationwide Building Society, we’ve gone from a “bright” outlook this time last year to “stormy”.
The region’s consumers - i.e. all of us - are now among the glummest in the country when it comes to looking in the economic and financial crystal ball.
It’s not surprising. When the storm clouds gather and it starts looking black over Bill’s mother’s we can be forgiven for worrying that we’re all going to get wet.
The problem is that “consumer confidence” is as irrationally volatile as the stock market. When the goods come and the money rolls in, we believe it will go for ever. We forget inconvenient truths such as all debt has ultimately to be repaid and soaring house prices are immaterial unless you can sell and bank the proceeds without having to worry about where you’re going to live.
Conversely, the first sign of a downturn is apt to engender dark thoughts and get us reaching for the anti-depressants. The jury is still out on whether the country really is heading for recession or whether the doom-mongering is being overdone.
Conventional economic thinking does not help too much in the current situation when so many unique factors are combining to create what many fear could be the perfect storm.
We have never – at least never in my memory – had a global credit crunch, inexorably rising commodity costs and a collapsing property market all at the same time.
Together, these have the capacity to blow a hole in the budget of even the most regulated, discipline household. Some of the gloomier practitioners of the “dismal science” – adherents of the Kondratieff long wave theory no doubt – are even drawing comparisons with the Great Depression of the 1930s.
I wouldn’t worry about that, if I were you.
The difference between the 1930s and now – apart from the current lack of fascist dictators and a reliance on the part of the UK on heavy industry - is globalisation.
A curse according to some, a boon and a benefit to man, according to others. Again, the jury’s out. But one affect of the dismantling of financial and trade barriers should help us here in the West Midlands weather whatever’s coming.
That’s the fact that the all-important automotive industry operates in global markets at varying stages of the economic cycle.
Nearly 80 per cent of the output of the country’s car factories is exported. Land Rover, for example, sells into more than 160 countries and is largely insulated from the downturn in the UK and US markets.
And BMW has announced that it has now exported its one millionth Mini after just seven years of production.
Mini goes to nearly 80 countries from Chile to China, so the likelihood of production cuts and lay-offs at its three factories should be slight.
On the other hand, this isn’t a good time to be an estate agent or a banker.