Mind the gap

An interesting article by the FT’s Economics Editor, Chris Giles, this morning in which he suggests that ‘the gap between action and sentiment puts the economy at a tipping point’.

Take surveys of households and companies at face value and the economy appears to be in free fall. Most measures of business confidence are sharply down on a year ago and the Gfk/NOP poll of consumers’ confidence about future economic prospects has declined to its lowest level since 1982.

But what households and companies are saying and what they are doing has rarely been so different. For all the misery poured out to pollsters, hard figures so far show people behaving as if they really believe Britain’s economy problems will be short and shallow.

Companies are not yet taking really tough decisions to cut costs. Instead they are keeping their workforce intact, presumably in the belief that it is better to hang on to employees in bad times because the good times will be with us again soon.

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