The dot.com crash does not mean a recession is coming

Not for a generation have we had it so good. This period of economic growth is the longest on record, inflation is low, incomes are rising and headline unemployment is soon likely to fall below one million. Such a happy combination is unparalleled in recent experience. No wonder it seems too good to be true.

Not for a generation have we had it so good. This period of economic growth is the longest on record, inflation is low, incomes are rising and headline unemployment is soon likely to fall below one million. Such a happy combination is unparalleled in recent experience. No wonder it seems too good to be true.

This does not mean, however, that the recent slump in high-technology shares signals that bust is about to follow boom. The mood in the financial markets always exaggerates to a feverish degree the underlying trends in the bits of the economy most of us care about. Two years ago, at the height of the global financial crisis, when many pundits were predicting a rerun of the Great Crash of 1929, the UK's growth rate did slow a bit. But it stayed faster than its long-run trend, and fast enough to carry on reducing unemployment, and rapid enough to help the Chancellor deliver exceptionally strong public finances.

Away from the City dealers' screens, and London's fashionable dot.com enclaves, there is little sign of impending doom. There are plenty of job vacancies, companies' exports are up despite the pound's strength against the euro, high street sales are rising and house prices, having seen a very rapid rise, are stabilising. Even if falling share prices are about to send Britain's high-technology industries into a slump, the effect on the economy as a whole will not be huge.

It will be a shame if the New Economy turns out to be over before it really got going on this side of the Atlantic. If the United States' computer and telecoms industries slow down now, at least they will be doing so after five solid years of growth which created a millionaire every 10 minutes, boosted productivity dramatically and transformed an entire economic landscape.

The extraordinary expansion in the US does seem to be drawing decisively to a close, and there is also a risk of recession in Asia. These developments might have an impact on this island economy. Yet it never was credible that the internet could abolish the business cycle, so a slowdown should not come as a huge surprise.

A gentle decline in the pace of growth would in fact be welcome, opening the way to eventual cuts in interest rates. Experience suggests such soft landings are rare, but we stand a better chance of enjoying one in this business cycle than at any time in the past quarter of a century.