One ray of sunlight is peeping through gloom

Jun 5 2008 by Peter Jackson, The Journal

THERE are many reasons not to be cheerful on the economic front at the moment.

Wholesale gas prices are nearly double what they were a year ago, as is the price of a barrel of crude oil. Household spending is down, consumer confidence is at its lowest since the early 1990s, house prices are falling and Bradford and Bingley is in trouble.

It would be an insane optimist who claimed that all these dark clouds have a silver lining, but there is at least one ray of sunlight peeping through.

Earlier in the week this newspaper reported that North East manufacturers are seeing healthy rises in output and orders, with the EEF reporting the 10th successive rise in growth for the region.

One of the reasons for this, I suspect, is the flip side of all the economic bad news. The rest of the world can see our difficulties and price us accordingly, by marking down sterling. For most of last year, the pound was remarkably stable against the euro, averaging about 1.50 euros to the pound, but at the time of writing stands at 1.27.

While this might be bad news for those of us who have booked holidays in Europe, it is good news for exporters, whose goods are correspondingly cheaper in world markets. The North East is a major exporting region.

We are also a major manufacturer and another factor in the global economy at the moment, and one which is driving up fuel and food prices, is the rise in living standards in the developing economies. In Eastern Europe, for example, the Czech economy grew by 6.5% last year, Slovakia’s grew by 8.7% in the first quarter and Poland’s by 6.1%.

These growth rates imply rising wages and that means these countries no longer have the same massive labour cost advantages over our own manufacturers that they have enjoyed in recent years.

None of this is sufficient to have us popping the champagne corks, but at least it reinforces the adage that it’s an ill wind that blows no good.