Economic Analysis: Fun not fear should rule, despite this market rollercoaster

Going to the cinema tonight, or nipping out for a meal? Well, here’s something to cheer you up in a cold winter week: the cost of having fun, in the UK at least, is actually cheaper than it was five years ago.

Financial analysis firm World Economics began charting its Cost of Fun price index, a broad basket of goods ranging from iPads to short-haul flights, restaurants, theme parks, golf clubs, cinemas and goods, at the beginning of 2011, with a starting score of 100.

The company has averaged out the cost of all recreational activities across a host of countries to tell us that the UK’s “fun gauge” now stands at 99.62, against a global rise in the index of 10% over the same period.

Compare that with Russia, where sanctions and a tumbling oil price have killed the rouble and sent the index up 60%. Brazil’s sliding currency tells the same story of spiralling costs but on the flipside of the coin the dollar is king; the greenback’s increased strength means leisure times are some 16% cheaper than in 2011 in the US.

The fluctuations in currency markets have a big bearing on this “fun” benchmark, as we can see, but why bring it up? In a week that sees inflation reach a “high” of 0.3% and wage growth far above that at 1.9%, it’s a way of pointing out that we’re not exactly on our uppers, despite the almost unremitting doom talk in financial markets since the turn of the year.

Some people — I’ve heard them myself — talk about a “looming global recession” as if it was a fact, while ignoring the detail that the world economy is still expected to see growth well in excess of 3% this year.

And the word on Armageddon clearly hasn’t reached UK consumers, who haven’t been shy about spending the continuing dividend from low inflation. The latest retail figures show that UK consumers splashed out a huge £44.8 billion in the five weeks before Christmas, and that the amount of stuff bought in the retail industry has grown year on year for 32 months running.

It may well be that UK spenders find themselves in the classic role of being the last to panic because they don’t realise the gravity of the crisis facing them. It’s more likely that they may just be shrugging and playing the quite nice hand that they’ve been dealt. I didn’t see any of them huddled in Bromley high street last weekend, anxiously discussing the potential impact of negative interest rates on bank profitability in concerned tones and sloping off home instead.

Admittedly, things aren’t quite as sweet as they were last summer, when real wages were growing at 3%. But the supermarkets are still slugging it out, every energy company in the country has now cut prices and petrol is still around the £1-a-litre mark.