The slowest recovery in modern history slows down
GDP figures today disappointed expectations, with growth slowing for the second quarter in row, and increasingly departing already from the Office for Budgetary Responsibility forecast.
In numbers: growth slowed to 0.5% in the last quarter of 2014, from 0.7% in the third quarter. This defied city expectations for 0.6%. The first official estimate for growth in 2014 as a whole is 2.6%, quite a way below the only recently released OBR estimate of 3.0%.
Moreover imbalance is increasingly evident, with growth relying almost entirely on 0.8% growth in the service sector. Production fell by -0.1%; within this manufacturing rose by only 0.1%, the weakest pace since the first quarter of 2013 (when -0.3%); construction output was down by -1.8%, the biggest decline for more than two years (since 2012 Q3, when -1.1%).
Everybody is familiar with the chart, borrowed here from Fraser Nelson that shows the feeble path of the recovery since the great recession (especially since 2011; = 3 years on his horizontal axis) compared with other UK recessions back to the Great Depression (from where ‘modern history’ is regarded as beginning; the latest figures are not included, but will only make the comparison worse).
The Treasury is reverting to celebrating the growth rate in 2014 as a whole (as well as playing the ‘international difficulties’ card), but if we are looking backward then the more relevant comparison is growth since the government took office in 2010. The chart shows for all OECD countries growth between the first quarter of 2010 and the third quarter of 2014 (only the UK has figures to Q4). Blue indicates euroarea membership.
GDP growth, 2010 Q1 to 2014 Q3
Source: OECD; Greece is cut off at -10 per cent.
The UK is in the middle of the pack; stronger than countries mainly from the euroarea, and weaker than countries mainly not in the euroarea. There is nothing special about this performance, and to my mind surely related to the relative intensities of austerity and the extent of autonomy over monetary action.
The ONS offered the Treasury a lifeline by saying that it is “too early to say there is a general slowing-down of the economy”. Yet the manufacturing slowdown seems well established over three quarters, and the construction decline is sharp. But either way, this is lacklustre growth at best, and way below that needed to restore the living standards of long-suffering working people and families.
UPDATE: It’s worse than we first thought. This is in fact the slowest recovery on historical record