Growth revision shows economic recovery is off track

Revisions to the national accounts data published by the ONS just before Christmas show economic recovery in the UK was stronger in 2010 than previously thought.

 

Revisions to the national accounts data published by the Office for National Statistics just before Christmas show economic recovery in the UK was stronger in 2010 than previously thought.

It is quite common for the statisticians to discover extra growth in the economy in the first year of recovery – in part because they find it hard to pick up the expansion of new businesses – and this repeats the usual pattern.

The new figures show GDP growth in the whole of 2010 was 2.1% – significantly higher than the initial 1.4% estimate.

What is most interesting though is that, according to these figures, the recovery from the 2008/09 recession proceeded at the same pace for five quarters – that is from Q3 2009 to Q3 2010 – as did the recovery from the two previous recessions (those of the early 1980s and early 1990s).

At this point in the current recovery real GDP was 3.2% higher than at its lowest point, compared to 3.1% in the 1980s and 3.0% in the 1990s. This might be judged a little disappointing, given that the 2008/09 recession was deeper than the previous two, but since then things have got worse.

While the economy recorded growth of 2.7% in the following year of the 1980s recovery and 4.8% in the following year of the 1990s recovery, growth in the UK over the last year has been just 0.5%.

And if forecasts from the Office for Budget Responsibility are right and the economy does not grow at all the final quarter of 2011 and the first of 2012, then this recovery is going to lag further behind the previous two (Graph 1 below includes OBR forecasts for the period Q4 2011 to Q4 2012).

Graph 1:

UK-recoveries
It would be wrong to be too gloomy. History suggests the statisticians might find some more growth in 2011 too. But this is shaping up to be the slowest recovery in the UK in the post-war period.

See also:

Glasman is battling over postage stamps, but growth is the priorityCormac Hollingsworth, January 9th 2012

Manufacturers still fear a double-dip recession in 2012Tony Burke, December 23rd 2011

The south is on its way out of recession, but the north is stuckLewis Goodall, December 15th 2011

Unemployment: Plan A isn’t workingRichard Exell, December 14th 2011

Grim economic news II: OECD cut UK growth prediction. AgainAlex Hern, December 13th 2011

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