Does the Road Runner cartoon offer a metaphor for the UK economy? The plot is the same each episode: Wile E Coyote attempts to catch and eat the fast-running bird.
He fails in slapstick fashion, quite often by running at speed off the edge of a very high cliff. And plunging to his doom. But disaster only strikes when he actually looks down and realises he’s running on thin air. Until then, he’s fine.
Three times in recent history the UK consumer has done something similar, Simon French of Panmure Gordon tells me.
The Nigel Lawson boom should have gone bust in 1988 when double Miras, mortgage interest relief at source, was withdrawn. The exchange rate Mechanism, with the uncompetitive pound pegged to the Deutschmark didn’t help either.
Wile E Consumer ignored this and kept on spending until 1990, when he suddenly looked down and immediately fell.
The mass sale of 100%-plus mortgages in 2006 should have been a clear sign that consumers were over-extending, just racing off the cliff. The boom continued until 2008 when someone looked down and noticed most of our banks were bust.
Now, nearly all the economic statistics that pertain to industry are bad. Investment has stopped. The latest bad evidence came from Begbies Traynor, which warned yesterday that the number of companies in “critical distress”, often a precursor to insolvency, rose 17% in the first quarter.
But the consumer is still spending as if everything is hunky-dory, as if inflation weren’t rising and disposable incomes weren’t stagnant.
This just can’t last, say economists. And we haven’t even Brexited yet.
Assuming they are right and Wile E Consumer is about to look down, see he has no support, and plunge to his doom, then there are going to be a lot of smug economists about the place as Britain crashes into recession.
Sadly for them, they will also at that point be unemployed. How smug can an unemployed economist be? More so than your garden-variety unemployed person, it’s fair to assume, but still out of work.
An alternative scenario is that this time Wile E Consumer doesn’t panic. He just keeps going and makes it to the other side.
Brexit, if it ever happens, isn’t that bad. Employment remains high. Wages tick up. At which point, the City economists are completely wrong.
But, annoyingly, still in employment. And, even more annoyingly, people are still giving them the time of day to explain why they were wrong.
Wile E can make it. Just don’t look down.
