MORI Financial Services Mood of the Nation Index

Ten years, ago, in April 1993, MORI began combining monthly measurements of general pessimism about the future state of the national economy, fear of redundancy among those in work and the level of unemployment, to calculate what we initially called the MORI Misery Index. After having a little fun discovering that (inevitably) the Scots were more miserable than the rest of us, it was eventually rechristened under its current name of the MORI Financial Services Mood of the Nation index. Still indexed on the findings of the first survey, April 1993=100 (with an index higher than 100 meaning that the public is less pessimistic than in 1993 and lower than 100 more pessimistic), it charts a fascinating monthly picture of the peaks and troughs of the public mood over the last decade.

In recent months it has been mainly troughs. In the first quarter of 2003, the public's mood was as pessimistic as at any time in those ten years: at its low point in February the index slumped to just 71, matching the previous low in October 1998. Even immediately after the September 11 attacks, when most experts thought an economic crisis was almost inevitable, the index did not drop to quite such a depth, its low point (in the October 2001 survey, the first after 9/11) being 75.

But the Mood Index showed a sharp rise this month, from 73 points at the start of April to 95 in May. The index has moved more sharply in the other direction on occasion (after all, confidence is much more easily lost than gained), but it is highly unusual for it to increase so dramatically; in fact, this 22-point month-on-month rise in the index is the third-highest in its history, being surpassed only by a 25-point jump in June 2001 and a 24-point rise in June 1997, both of which were clearly associated with general election victories. The association of these earlier rises with a high-profile political event suggests that in this case, too, political factors - presumably, specifically, the success of the war in Iraq - may be at the root of the public's fading pessimism. In each of those two earlier cases, however, the leap in the index came as the culmination of a succession of smaller increases, the index reaching a peak (169 in June 1997, 129 in June 2001) from which it fell back the following month. This month, however, the lurch upwards was from a much lower point, and perhaps it is less inevitable that it will be a short-lived boost.

Looking behind the figures, the increase in the Mood of the Nation index comes entirely from one element in its calculation, a fall in the percentage of the public expecting the economy to get worse over the next twelve months (from 57% in April to 40% in May). A similar shift, though less pronounced, was also evident in the economic optimism measure in the MORI Political Index at the end of April. (The MORI Political Index includes the same question on the future state of the economy as the MFS Mood of the Nation survey, but measured at the opposite end of the month.)

The fall in pessimism was spread equally across all classes and all age groups, and applied to both men and women and in all regions of the country. Political attitudes, though, were a discriminator, with a smaller shift among Conservatives (a 13-point fall in pessimism, from 63% to 50%) and Labour (down 17-points, from 44% to 27%) than among Liberal Democrats (down 23-points, from 70% to 47%). As it was Liberal Democrats who were most consistently opposed to the war in Iraq, it makes perfect sense that it should be on their opinions that the impact of the war should be greatest, if this is indeed the underlying cause of the rise in the Mood Index.

There was much less movement in the fear of redundancy measure; the public were marginally less worried, but not dramatically so.

However, what is significant here is not that the fear of redundancy measure does not move up when economic optimism increases, but that it does not fall sharply when economic optimism falls; it is already at a relatively high level, even with the overall Mood Index at its lowest point. In the March-April survey, only 25% were very or fairly concerned; in the first half of the nineties, the figure was more than double that on several occasions, half the workforce worried about losing their jobs. It is clear that, even if the objective economic climate has not changed vastly over the last ten years, with memories of mass unemployment fading further into the past the element of fear is no longer so crucial an operative factor. However, other MORI research on behalf of career consultants Penna Sanders & Sydney, shows a significant increase in concern about redundancy among the working population over the 6 months up to February 2003.

This disjunction between perceptions of the economy as a whole and personal consequences is also seen in another MFS measure, which measures personal financial confidence. Personal confidence is invariably higher than national economic confidence (in May the score was a net +5 while confidence in the whole economy was net -25), and is also considerably less volatile.

It seems clear that many of the public who have fears for the economy as a whole at any point feel that they themselves are likely to escape any damaging effects. We often find similar patterns in surveys of businessmen, when respondents are usually much more bullish about prospects for their own company than for the whole of their sector.

This pattern, of course, has significant economic consequences. Spending and saving patterns may be dictated more by individuals' perceptions of their own prospects than of the economy's; if they simultaneously believe that they have no reason not to borrow and spend, since their own position is secure, and that investment is risky because the economy as a whole is in trouble, a high borrowing and eventually inflationary economy is likely to ensue. It is worth noting, at any rate, that the way in which the public relate the economy to their own circumstances has changed over the last ten years, and therefore they cannot be expected necessarily to behave in the way that they used to.