Excessive pessimism over the state of the economy risks undermining the recovery and making a tough situation worse, the Bank of England’s chief economist has warned.
Andy Haldane said Britain had “recovered far faster than anyone expected” but was still beset by fears for the economy.
Such concerns could be “self-fulfilling”, weakening the economy if households cut back spending or nervous businesses hold off hiring and investing.
Mr Haldane warned against “a propensity to dismiss good news and dwell on bad” and “to catastrophise about the future”, calling these “symptoms of anxiety”.
“Collective anxiety is as contagious, and could be as damaging to our well-being, as this terrible disease,” he said in a speech to businesses in the north west of England.
“Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken.”
Consumer spending has staged a “remarkable” recovery, which is key as it is the backbone of the British economy.
“As best we can tell, consumer spending now stands at around pre-Covid levels. In other words, consumption has fully recovered more than a year earlier than the Bank expected as recently as August. Large-ticket purchases, such as cars and houses, are also back to around pre-Covid levels,” Mr Haldane said.
He now thinks the economy will have recovered 90pc of its losses by the end of October, leaving GDP between 3pc and 4pc lower than it was before the pandemic struck.
Despite this rapid recovery of most economic activity, he noted that human instinct dictates that people focus on risks and worse outcomes, rather than celebrating progress.