The latest Ipsos MORI Political Monitor shows economic optimism is at the highest it has ever been in its 36 year history. But what does this mean in practice? And what implications, if any, are there for the leaders vying to preside over the UK economy from next May?
Since April 1978, we have been asking whether people expect the general economic condition of the country to improve, stay the same, or get worse over the next year. And nearly every single month since then, we have released an Economic Optimism Index score (EOI) of the percentage who say it will improve minus the percentage who say it will get worse.
This month, more than half - 53% - of Britons thought the economy would improve, with 18% thinking it will get worse. This gives an EOI of +35, the highest we have ever recorded. This may be seen as a cause for celebration, but what does the history of the Economic Optimism Index reveal about the implications of this?
As may be expected, there have been many peaks and troughs in economic optimism over the past 36 years. The peaks, as with this month's rating, have often come following periods of poor economic performance.
In general, we appear to be a pessimistic country (economically at least), with EOI sub-zero far more frequently than it is positive, and with lower lows and more moderate highs. The mean EOI score is -15.3, with the median -16.5. In the below graph, we have identified levels above which we see EOI as being notably high (+15), and below which it is historically low (-45), at +/-30 percentage points from the mean.
We have seen 26 months where EOI has been at +15 over above, across seven discrete periods of optimism, and 28 months of pessimism with EOI below -45 across eight periods.
The very first time we asked the question, in April 1978, EOI was a strikingly high +24, in a period of economic stability following the 1976 IMF crisis. This fell during the Winter of Discontent later that year and recession in the early 1980s, but rose again to peak in 1983 (when EOI didn't quite reach the heights of +15 but certainly spiked from the trough of the recession) as the economy recovered from this low. Similarly, we saw peaks following the early 1990s recession, culminating in an upspring of optimism immediately following the 1992 election (+21), and in a period of growth following the 2008 recession, another peak in late 2009 (+23). And now again, following the heights of the Eurozone crisis and a period of economic stagnation, we have seen another boom in optimism.
It may be argued that the timings of the general elections played a part here - that economic optimism is likely to be highest at these times, when political engagement is at its highest and politicians make their case for how they intend to improve the economy, and in the honeymoon period of a new government. The increase in optimism around the 1987 election (following a budget passing popular income tax cuts) and 1997 election (in expectation of a landslide New Labour victory and the subsequent honeymoon period) do seem to fit with this theory, with markedly rising optimism not matched by a similarly marked change in GDP trends. But while this may be part of the story, the patterns are not completely consistent.
The 1992 EOI boom peaked post-election, which may be interpreted as a sign of a post-election honeymoon period; however, this peak appears to be a culmination of economic optimism which had been steadily growing from Spring 1991, after the worst of the early 1990s recession was over. The 1983 peak in economic optimism similarly came at election-time, but also reflects a period of GDP growth from recession. The rise in EOI around the 2010 election, meanwhile, actually peaked at the end of 2009 as the economy moved out of recession.
Further, the elections of the 2000s don't fit the pattern of election-related optimism at all. Rather, in this period of sustained economic growth - as in similar periods in the mid to late 1980s and mid to late 1990s - pessimism prevailed.
There is no simple relationship between general elections and economic optimism, then. But this also shows that economic growth does not guarantee economic optimism. Rather, it appears Britons are most optimistic when the economy is growing from a low base; when things can only get better, to turn a phrase. On the other hand, when the going is good, we are more likely to think that times of growth will be short-lived - though part of this may be optimists moving to thinking the economy will stay the same - no bad thing in times of economic prosperity.
Lows, meanwhile, come (predictably) at times of high profile economic stress. The joint lowest points came at times of recession, -64 in January 1980 and in July 2008, with other economic lows coming during the early 1990s recession (-43), in the aftermath of Black Wednesday in 1992 (-46) and as Japan fell into recession and the likes of the OECD (incorrectly) predicted the same for Britain in 1998 (also -46).
9/11 and the 'war on terror' in the early 2000's were also times of pessimism, with EOI at -56 in September 2001, and -50 in February 2003 as Britain prepared for (and protested against) the Iraq War.
What does this mean for our political leaders? Britons appear by nature to be pessimistic with regard to the economy. We have now had 11 consecutive months of positive EOI scores - the second longest on record, behind a 15 month period around and following the 1987 general election. If we are to see this optimism to continue into the 2015 general election, it will beat the record by a full eight months.
Political life is unpredictable - an unexpected economic downturn, or simply 'events' may undermine economic optimism before next May. Even if the economy continues to grow and no other major political events shake public confidence, the trends suggest that peaks in optimism don't usually last. Particularly around election times, there is still much we don't know about the forces behind economic optimism.
Even if economic optimism holds strong, it is not clear who it favours. Other elections at times of economic optimism and resurgent economic growth have delivered contrasting results - where the governing Conservatives hung on in 1983 and 1992, the Labour government was defeated in 2010. The political dimension of economic optimism may relate to satisfaction in the government's performance, or may reflect optimism that the opposition party they prefer is soon to take over - or may be entirely unrelated to their voting intention. The Economic Optimism Index holds no easy answers for politicians.
For the rest of us, though, let's enjoy the optimism while we have it. Who knows if it will last?