Perception, it is sometimes said, is nine tenths of reality. 

On that yardstick, you’d conclude that things are pretty grim for the UK economy, with incomes squeezed by rising prices and taxes, the public finances in a state of apparent collapse, the health system poleaxed for years to come by Covid-related backlogs, interest rates on the rise, and international trade still struggling with the bureaucratic impositions of Brexit.

 Understandably, people are again feeling glum about the future.

Yet if we for the moment stand back from the perception, daily reinforced by the tyranny of a 24-hour news agenda, the reality is actually not that bad. Retail sales are rebounding, the housing market is humming, job vacancies are at an all-time high, unemployment is close to record lows, and having used the pandemic for long-overdue restructuring, many firms have never been in such good shape.

The obvious worry is that today’s strong rebound in the economy is almost entirely built on the possibly unsustainable sands of pent-up consumer demand. Inability to spend as usual during the privations of lockdown has made many households relatively cash rich; regardless of the coming cost-of-living crisis, those cash piles are now being disgorged. The consumer economy is therefore roaring away as rarely before.

Unfortunately, the same cannot yet be said of either international trade or business investment. 

Despite the Chancellor’s “super-deductions” tax breaks, intended as a spur to business investment, firms are not spending as they should be on new plant, machinery and other equipment. International trade also remains mired in a combination of Brexit and Covid-induced limbo.

Jacob Rees-Mogg, the Brexit Opportunities Minister, is right to point to the continued impact of Covid restrictions, but I fear he is in denial in claiming that evidence for Brexit-related damage to trade is “few and far between”. 

Virtually every firm I speak to complains of the increased costs and lost time of exporting to and importing from the Continent.

All the same, the fact remains that the economy is in much better shape than anyone dared hope when it was put into enforced slumber at the start of the pandemic two years ago. 

Low-income families are going to be hit particularly hard by the cost-of-living crunch, but if on average real disposable income shrinks by “just” 2pc this year, after accounting for wage growth, inflation, tax increases and benefit changes – as forecast by the Bank of England – you might think the nation has got off lightly given what it has just gone through.

This would admittedly be the steepest fall since records began in 1990, and as I say, for some it will be a much bigger hit. But for the bulk of the population, it seems at least manageable.

As if to confirm the story of returning normality, NatWest Group – as good a proxy for the UK economy as any – has announced more than £4.3bn in operating profits for last year, a dramatic turnaround from the year before, which had all the usual suspects calling for windfall profit taxes and a ban on bankers’ bonuses. 

They should take a look at the picture over the two-year life span of the pandemic before making judgments.

The previous year the bank had recorded a £351m loss after providing £2.6bn for bad loans. The return on equity over two years was therefore a miserable 3.5pc, which is hardly windfall profits territory. Besides, there is already an excess profits tax in the form of the bank levy introduced after the financial crisis, and of the £3.8bn of dividends and buybacks announced for last year, more than half the benefit already goes to the taxpayer by dint of the Government’s 51pc stake.

As an aside, it is worth noting that were it not for the perversely destructive rulings of European competition regulators, the return would be a good deal higher. Tens of billions of pounds of value were scandalously transferred from the taxpayer to vulture capital investors as a result of the fire sale of assets ordered by the European Commission as “compensation” for the state aid NatWest, then called Royal Bank of Scotland Group, received during the financial crisis.

As it is, the taxpayers’ stake is still worth only half what the Government paid for it. As for ordinary investors, their shares are worth little more than a tenth of what they were before the financial crisis. Few, if any, will be alive long enough to see their money back. Even for the Government, the shares would have to rise from the current 80pc of book value to more like 2.2 times before equaling what was paid for them. It is hard to think of any retail bank in Europe, or the US for that matter, that commands such a valuation.

In any case, the swing from loss to profit at NatWest is substantially accounted for by the mysteries of bad-debt provisioning. In the depths of the pandemic, the bank charged £2.6bn for estimated future defaults, but this has proved way more than is needed, an overreaction that broadly mirrors that of the wider public policy response to the pandemic. Some £1.3bn has as a consequence been written back in the latest numbers, confirming the old truism that bank profits are largely what the accountants choose them to be rather than a reflection of what’s really going on.

As with the economy it is none the less again possible to be reasonably upbeat about prospects, despite the constant outpouring of doom mongering among our leading media outlets. Rising interest rates may be bad news for overstretched mortgage borrowers, but they are good for bank profits and good for cash savers. It’s easy to forget, but the majority of households fall into the latter category.

OK, so it would be foolish to pretend that with the pandemic essentially over, all is sweetness and light from here on in. For many people, the next couple of years will be tough. But a sense of perspective is also called for. The economy has emerged from the trials of Covid in far better shape than it might have done. The damage to livelihoods is not nearly as bad, and the long-term scarring from the pandemic is a good deal less severe than everyone feared when the patient was first put into intensive care.

Unlike the financial crisis, moreover, the banking system has proved a pillar of strength, helping to tide the economy through its moment of need rather than as has happened so often in past periods of crisis, further undermining it.

It would be wrong to attribute this resilience wholly to the brilliance of government policy, which to the contrary has been found repeatedly wanting over the past two years, but when it comes to facing the voters again in a couple of years’ time, the economy could yet prove the Conservative Party’s strongest card.