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British Economy Fails to Stir "Animal Spirits"

British Economy Fails to Stir "Animal Spirits"

by Raksha Arora

The American economy is on the mend and a global recovery cannot be far behind. Strong real GDP numbers, productivity growth, rising corporate profits, and business spending all support the notion that the American economic recovery is real and sustainable. Yet according to Gallup Polls* conducted in the United States, Canada, and Great Britain last month, though residents of each country are cautiously optimistic, in each case they have maintained fairly conservative outlooks.

According to the mid-December numbers, only 37% of Americans characterized economic conditions in the country as "good" or "excellent," 44% described them as "fair," and 19% said that economic conditions are poor. (A poll conducted Jan. 12-15, 2004, shows similar numbers among Americans, but the December 2003 numbers are used in this article for direct comparison purposes.) Public opinion in Great Britain closely mirrors that in the United States. In December 2003, 37% of Britons rated economic conditions as good or excellent, 46% described them as fair, and 17% said economic conditions in Great Britain are poor.

Interestingly, Canadians are more positive about economic conditions in their country than either their British or American counterparts. Despite an appreciating currency and the aftermath of the SARS outbreak in Toronto, a majority of Canadians (54%) rated current economic conditions in their country as good (51%) or excellent (3%). Thirty-eight percent described them as only fair and 8% said they are poor.

In America, "Animal Spirits" Stir

Over the course of 2003, both Americans and Canadians became increasingly satisfied with economic conditions in their respective countries as the year progressed. In the United States, public perceptions of economic conditions improved dramatically. While only 22% of Americans rated economic conditions as good or excellent in February, by the end of the year that figure had climbed 15 percentage points to 37%. Massive fiscal and monetary stimulus translated to business spending and a profit recovery, and the economic exuberance John Maynard Keynes called "animal spirits" began to stir again.

In Great Britain, on the other hand, improvement in the economic outlook stalled at the end of the year. The percentage of Britons rating conditions as good or excellent improved from 30% in February to 41% in June, but the year ended with 37% describing current economic conditions that way. Perceptions of the economy in Canada also improved at a more modest rate; the percentage rating conditions good or excellent moved from 46% in February 2003, to 52% in June, to 54% in December.

An Unequal Optimism

Although only 37% of Americans believed economic conditions in their country were good or excellent in December, a clear majority (60%) thought conditions in America were getting better. In comparison, only 47% of Canadians and 29% of Britons expressed similar optimism. The fact that Americans are so positive about economic prospects for their country while the British are resoundingly pessimistic -- at a time when both economies are reportedly in recovery -- raises questions about the degree to which British consumers will contribute to economic growth in the short term. Nearly 6 in 10 Britons (58%) expressed the bleak view that economic conditions in the country are getting worse.

Thus, while public opinion in the United States and Canada reflects -- and reinforces -- each country's current economic recovery, in Britain, public opinion suggests a darker outlook. Overall, Gallup's data seem to suggest that the recoveries in these three countries, though well on track, will not necessarily be synchronous.

*Results in the United States are based on telephone interviews with 1,000 national adults, aged 18 and older, conducted Dec. 15-16, 2003. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points. The survey was conducted by Gallup USA.

Results in Canada are based telephone interviews with 1,012 national adults, aged 18 and older, conducted Dec. 5-11, 2003. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points. The survey was conducted by Gallup Canada.

Results in Great Britain are based telephone interviews with 1,000 national adults, aged 18 and older, conducted Dec. 2-21, 2003. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±5 percentage points. The survey was conducted by Gallup UK.

Results for the Canada and Great Britain surveys may not equal 100% due to rounding error.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.


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