Return to the 70s

Stormy weather ahead? Copyright Philippa Roberts 2012

There's a short article in the FT today, suggesting that stagflation could be rearing its ugly head.  I've always thought it was an ugly word for an unpleasant situation - one where growth is low or non-existent, but prices are rising.

It's worth remembering that the Bank of England has a remit to keep inflation at or below 2%.  It has now missed this target for the whole of the last two years.  Figures this week show that inflation has fallen and are seen as a good news story, but it still runs at 2.2%.  And this is at a time when the economy is shrinking.  

The OBR has also published its latest data today, which shows that growth was recovering well in June 2010.  But that it isn't now.  Thanks to @faisalislam for his useful annotation of the key diagrams on twitter this morning.  As he's tweeted today, he's not making a political point, just demonstrating where the recovery ground to a halt.

That said, I also read somewhere (can't remember where now to link to it) that we are currently more optimistic about our situations than at any other point since 2007.  Apparently 29% (if I've remembered that right) of us think our financial situation will improve in the next 12 months!

I feel very lucky to be running a business that is growing at the moment, but am horribly aware of how quickly that positive cashflow can disappear.  I'd like to recruit, but don't want to take someone on if I can't be sure I can still employ them in 12 months time.  Getting rid of their employment rights in exchange for a share in the company isn't going to help either! A break from National Insurance payments might though.

In the meantime, let's hope that inflation does slow down and recovery does reappear.  The 70s were a fairly grim time, for lots of reasons, let's hope stagflation isn't the thing from that decade that comes back in fashion.