Britain is heading for its most joyful year in the last quarter of a century, according to a group of economists.
Oxford Economics, a consultancy, says that the UK’s “misery index,” a combination of unemployment and inflation, will tumble to a multi-decade low in 2015.
The graph goes all the way back to 1989, when consumer price index data starts. With inflation under control and unemployment low from the late 1990s, the index fell in the years before the crisis. But Oxford Economics is betting it goes even lower in the months ahead of us.
The index was created by Arthur Okun, a high-profile American economist. It’s literally as simple as adding the unemployment rate to the rate of inflation. So with unemployment levels dropping back towards pre-crisis levels, and inflation at the lowest in 10 years (and still falling), it’s a decent bet by Oxford Economics that the misery index will soon hit the lowest level in at least 25 years.
Some people would probably take issue with this: Some factors that the index doesn’t take account for, like wage growth, are still very weak. But on this metric, it’s going to be a good year ahead.
Here’s Oxford Economics’ Scott Livemore on the “joyflation” trend:
There has been a lot of concern expressed in Europe about the risks of deflation and the threats it poses to economic stability. But falling oil prices offer the prospect of “good deflation” for the UK — giving people and companies more cash to spend and so supporting economic growth and jobs. It’s like we’ve had a big tax cut, but one paid for by the oil-producing nations overseas rather than by the Treasury.