From the TUC

GDP Figures: The Long Slump

25 Jan 2013, by Guest in Economics

Today’s GDP figures will no doubt see much commentary focussed on how the UK now faces the risk of an unprecedented triple dip recession but rather than looking at one or two quarters of data it is usually more sensible to take a longer term view.

It has now been ten quarter’s since the ‘emergency’ Budget of 2010. Since then the economy’s performance has been disastrous.

Whether we get a triple dip or not is actually beside the point – we’ve already had two and half years of stagnation.

The chart below compares actual GDP growth to the original OBR forecasts, on which the Government’s plans were based.

OBR versus outturn

Since the second quarter of 2010 the economy has managed growth of just 1.1% against forecast of 6.5%.

This large miss is partially explained by the OBR using estimates of the fiscal multiplier that turned out to be far too low.

The economy is still around 3.4% below its pre-recession level – and if the average pace of the last two and half years were to be repeated it would be almost another 8 years before we regain 2008 levels of GDP.

GDP per capita – a more important driver of living standards than headline GDP as it accounts for the rising population – fell in 2011 and 2012.

We are performing badly relative to our international peers and terribly against our own historical recoveries.

The third quarter was boosted by special factors such as Olympic tickets sales and the timing of bank holidays – the second quarter was depressed by the Jubilee. Today’s figures allow us to look at 2012 as a whole with fewer distortions. We had zero growth.

This morning’s release contains no evidence that the much hoped for ‘rebalancing’ is occurring. Manufacturing output is lower than in Q2 2010 and construction output has dropped by almost 10% in the same period.

The record of the last two and half years is of a flat-lining economy, a huge squeeze in real incomes and a fiscal target that has now been missed. We might get a triple dip with the next set of figures or we might not – either way weak growth is set to continue with the latest independent forecasts pointing to growth of just 0.9% in 2013 as a whole.

Unless the Government changes course the long slump will carry on.

8 Responses to GDP Figures: The Long Slump

  1. RedShift
    Jan 25th 2013, 11:45 am

    *slump – last line?

  2. GDP results: where’s our private sector-led recovery? | ToUChstone blog: A public policy blog from the TUC
    Jan 25th 2013, 1:05 pm

    […] always remember that these are preliminary results, there’ll be revisions of these figures.) As Duncan has pointed out, the key point here isn’t whether we’re going to have a triple-dip recession: […]

  3. GDP figures: The long slump | Public Finance Opinion
    Jan 25th 2013, 2:59 pm

    […] Duncan Weldon is senior policy officer in the Economic and Social Affairs Department of the TUC. This post first appeared on the TUC’s Touchstone Blog […]

  4. jonathan
    Jan 25th 2013, 3:13 pm

    You missed a point: now that this has continued long enough, the government can claim potential output has been reduced and that of course means more of the same is required because that will boost potential.

  5. How more workers can produce less | ToUChstone blog: A public policy blog from the TUC
    Jan 28th 2013, 5:55 pm

    […] The much hoped for ‘rebalancing’ of the economy is not taking place – as Duncan reported, manufacturing output is lower than in mid-2010. Yet in failing to invest in the high value supply chains of the green […]

  6. Ralph Bayley
    Jan 30th 2013, 12:18 pm

    There is a further way to describe economic inactivity during this recession. We have lost around 45% of a year’s output since the first quarter of 2008. This figure is a combination of the lost 19.5% year’s output due to the economy not maintaining its pre-recession output level plus the lost 25% year’s output due to it not achieving the potential output growth of average post war levels over the 4.75 year period.

  7. Vince Cable can’t break out of George Osborne’s Trap on the economy | Liberal Conspiracy
    Mar 7th 2013, 2:23 pm

    […] in fiscal policy, the Chancellor is once again turning to monetary stimulus to ease the crisis. The FT today reports that plans are afoot to change the Bank of England’s remit. But as I’ve written before, whilst there is a case for looking again at the Bank’s mandate we […]

  8. Vince Cable can’t break out of George Osborne’s Trap on the economy | BirchIndigo
    Mar 7th 2013, 5:00 pm

    […] in fiscal policy, the Chancellor is once again turning to monetary stimulus to ease the crisis. The FT today reports that plans are afoot to change the Bank of England’s remit. But as I’ve written before, whilst there is a case for looking again at the Bank’s mandate we […]

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