There’s causes to be joyful amid the gloom, says HAMISH MCRAE

It’s the season to rejoice, however there’s not lots of that within the air for causes everyone knows about. But ought to that sense of gloom apply to economics and finance in addition to geopolitics? It is straightforward to make the case that it ought to.

There has at greatest been very gradual development within the UK and Europe. Real incomes could also be rising, however after a giant fall earlier within the 12 months.

UK share costs have been flat, with the FTSE 100 index up simply 2 per cent on the 12 months, so nicely down permitting for inflation.

Taxes as a proportion of gross home product (GDP) are projected to achieve the very best degree since 1949, but the standard of Government providers is at greatest uneven. There have been all these strikes and, to cap all of it, there’s the specter of recession subsequent 12 months. It feels extra Scrooge than Santa.

But is that this proper? Christmas is definitely additionally a time to depend our blessings and there are a lot of.

More essential, although, is the rising proof that the UK economic system is at some kind of turning level, and because the 12 months forward progresses we are going to all turn into extra acutely aware of the positives and fewer floor down by the remaining.

The blessings embrace the bottom unemployment for the reason that Nineteen Seventies, so the bottom in virtually everybody’s working lives. Median family wealth is £302,500, so it’s not simply the wealthy doing nicely – folks within the center are doing all proper too.

Income inequality has been broadly secure for the reason that early Nineties, and figures from the Office for National Statistics (ONS) present that it’s a little decrease than its peak in 2008 beneath the final Labour authorities – not many individuals realise that.

And after all our blessings ought to embrace parts not counted in financial phrases, together with higher well being than ever earlier than. Nothing is ideal, however we’d like a way of proportion. Now look forward. The large change we are going to see within the coming 12 months is the disappearance of inflation.

Disappearance? Well, not completely however, simply because the Bank of England grossly underestimated the tempo of the rise, now it’s making the identical mistake in reverse.

Private sector forecasts, equivalent to these from Pantheon Macroeconomics, reckon we shall be again to 2 per cent by the summer season. That will clear the trail for price cuts.

Indeed that’s what the markets are already delivering. I fairly bang on concerning the significance of the ten-year gilt yield, but it surely actually issues as a result of it impacts all long-term borrowing prices.

In October it was nicely over 4.5 per cent. Last week it was down to three.75 per cent, and on Friday it dipped beneath 3.5 per cent. This is superb. I can’t recall there ever being as swift a decline in the price of long-term borrowing as has occurred up to now few weeks, and this may feed proper throughout the economic system within the coming 12 months.

We will see that in all kinds of how. House costs will get well. They could fall a bit extra however by the summer season they need to be climbing and by the top of the 12 months ought to be again to their all-time peak of autumn 2022.

That will gas consumption, as a result of once we transfer house we at all times have to purchase stuff to place within the new place.

There is scope for that. Household financial savings are a lot greater than they’ve been for many of the previous 20 years, which means that as folks turn into extra assured they may be capable of spend extra.

And since family consumption is by far the largest proportion of GDP, greater than 60 per cent of it, that goes straight into financial development.

Growth? Well, there have been these dismal GDP numbers final week, however given the ONS retains revising its sums, I actually suppose we must always take all these stats with a pinch of salt and have a look at actual information as a substitute.

Companies are hiring, with an all-time excessive in employment, and they’d not be doing so in the event that they anticipated recession subsequent 12 months.

Tax revenues are very robust – fairly too robust for these of us paying revenue tax payments earlier than 31 January – and that claims the economic system should be doing all proper.

And, for what it’s price, forward-looking information such because the Purchasing Managers’ Index for the UK suggests modest development within the coming months.

It is at all times laborious to translate normal financial and monetary forces into what’s going to occur to the true economic system, however intuitively I reckon 2024 will transform a 12 months of two halves.

The first half shall be one when there’s nonetheless lots of uncertainty.

But as soon as the Bank of England relaxes and cuts rates of interest, and our Chancellor begins slicing taxes, the second half will really feel a lot brighter. Phew.