Confidence evaporates in Cardiff
I haven’t felt particularly enthusiasticabout work this week â€“ like much of the rest of the country, I suspect. Itmight be the fact that I’m running out of patience with the pitiful weatherthat spring has thrust upon us, with endless gales, overcast skies, and regulardumpings of rain. Or is it the thought of having to wait until 2011 before theAll Blacks have another chance to get their hands on the Rugby World Cup?
Back in 1996, the National Bank conductedsome analysis that successfully used All Black performances as an explanatoryvariable in predicting election results (along with the less novel indicatorsof economic growth and the length of time in government). So with the mediadoing their best to multiply the clouds of doom and gloom across the countrysince the French pulled off their shock quarter-final win, I wondered whetherthe All Blacks efforts have any measurable impact on the nation’s psyche.
Let’s start with the average Joe on thestreet. We’ve got consumer confidence data from the One News/Colmar Bruntonpoll and its previous incarnations stretching back to 1976. Regressing thismeasure of consumer confidence against the All Blacks’ monthly win ratio overthe last 30 years shows no significant connection between rugby performancesand people’s overall sense of economic wellbeing.
But if we factor in whether the AllBlacks won or lost at the World Cup, something starts to show up. Consumerconfidence can be expected to lift by around five percentage points threemonths after the All Blacks fail to win the cup. Maybe this representssomething of a rebound in happiness once we’ve got past a two-month period ofmourning.
However, there are a couple of likelierexplanations for the apparent correlation between the World Cup and consumerconfidence. The share market crash in late 1987 swept away any last vestigesof rugby-related euphoria generated by David Kirk’s men earlier in the year. And a surge in exports in early 1992, marking the end of a major recession in New Zealand and around the globe, was more significant for the economy than the 1991semi-final stumble. World Cup results after 1991 appear to have less effect onconsumer confidence.
So what about the business community? Using business confidence from the National Bank’s Business Outlook over thelast 20 years suggests that World Cup performances, as well as the All Blacks’efforts in the intervening years, have the ability to influence businesssentiment. A losing All Black team has the potential to temporarily knock downbusiness confidence by between four and seven percentage points, with anadditional hit of six percentage points if the loss sees them knocked out ofthe World Cup.
It seems odd that businesspeople would bemore concerned about the rugby than your average consumer. Nevertheless,specific businesses and ventures have greater capacity to be influenced by theAll Blacks. Petrol sales are now unlikely to be boosted by offering plasticAll Black figurines. All Blacks merchandise and clothing won’t be rushing outthe shop doors. And how well is Murray Deaker’s new book going to sell withthe title "Henry’s All Blacks: How the 2007 Rugby World Cup was notWon"?
Some of the analysis and commentaryfollowing the quarter-final has expressed the hope that, as a nation, ourreaction will be more "grown up" than the vitriolic episodes that followed the1999 and 2003 eliminations. If it’s any indication, the data suggests that theeffect of the All Blacks on confidence is less prominent now than it was 10-15years ago. A continuation of that trend means that, when 2027 rolls around, wemight barely notice there’s a World Cup being played â€“ although English soccerfan’s obsession with 1966 would suggest otherwise.
Don’t be surprised if confidence numberslook a little soft over the next couple of months. By the time the new yearrolls around, summer will have kicked in and the nation should be largelythrough its collective grieving process.
To be perfectly honest, anyone keeping aneye on the economy should have bigger issues to concern themselves with anywayâ€“ the possibility of further interest rate rises, for example, or a propertymarket slump. The only people with the right to feel gloomy following theWorld Cup loss are the players, coaches, and management staff. After all, it’stheir jobs that are now genuinely on the line.