by Stephen Tall on May 11, 2013
Did the double-dip recession ever happen? It looks increasingly possible that it didn’t — the BBC reports the latest revision to the data:
A revision by the Office for National Statistics (ONS) has cast doubt on the UK’s double-dip recession last year. Revised growth estimates now suggest the construction industry shrank in the first quarter of 2012, but by less than previously thought. Analysts say the revision may be enough to mean the overall economy narrowly avoided falling into recession for a second time. The ONS is due to give official confirmation of this in June.
In fact there was a double dose of good news (well, good news relative to the last five years at any rate), with the latest NIESR growth figures suggesting the UK has left recession behind with 0.8% growth in the three months to the end of April:
Our monthly estimates of GDP suggest that output grew by 0.8 per cent in the three months ending in April after growth of 0.3 per cent in the three months ending in March 2013.
Though before we get too carried away, NIESR adds:
The base effect from the weak level of output in the January 2013 has inflated the quarterly rate of growth in both the production sector and broader economy in the three months to April 2013.Underlying growth is weaker than the headline figure suggests.
1) If (and it remains an if) the UK did avoid recession that does not mean the British economy is mended. Growth is still sluggish: it will be 2015 before the UK returns to its 2008 output levels. Crucial mistakes have been made. Labour complacently spent more than the country could afford thinking they’d abolished boom and bust. Alistair Darling then budgeted to cut the deficit by slashing capital spending in March 2010 — the most damaging possible austerity — and the Coalition followed his plans. The economy was further squeezed by lower household incomes caused by rising commodities prices and by the Eurozone crisis. (It’s worth reading Vince Cable’s New Statesman article – When the facts change, should I change my mind? – if you haven’t already.)
2) Kudos is due to The Independent’s Hamish McRae, who (as I highlighted here) last year stuck out his neck to declare that the British economy was not in recession even while the official statistics were showing it was:
It is perfectly possible that there might have been one quarter of negative growth over the past year and this may be it. But pull all the other data together and the figures would be consistent with an economy growing at around 1 per cent a year. That would be disappointingly slow. But I suppose it is understandable given what is happening across the Channel and given the debts households have to pay off.
3) And the revision was also anticipated by YouGov’s Peter Kellner in his New Year article supposedly looking back from 2016 on the reasons the Tories had won the ‘previous year’s’ general election:
Then came the moment that changed the course of the election. The Office for National Statistics produced revised figures for Britain’s gross domestic product. These showed that the economy had done better back in 2012, and started to recover earlier, than previously thought. GDP had not slipped back that year after all. There had been no double-dip recession. The cries of joy in Conservative Central Office could be heard by passers-by on Millbank. Labour’s campaign was made to look ridiculous. After that, there could be little doubt that many floating voters regarded the election more as a second referendum on Gordon Brown’s record than a first referendum on the Cameron years.
I doubt the results will be quite as dramatic as Peter Kellner speculated they might be. But it could still be a significant moment.