What a pathetic recovery
The new Index of Production figures highlight something interesting. As far as manufacturing and the other production industries are concerned, 2008-9 wasn’t the worst recession on record, that honour still goes to Mrs Thatcher’s economic experiment. But we are experiencing the feeblest recovery for more than forty years.
Coverage of the figures has tended to focus on the large improvement in July – the production industries were up 2.9 per cent from June and manufacturing was up 3.2 per cent. But taking a longer perspective, the picture is less positive:
The picture for the overall Index of Production is very similar. This month’s improvement is welcome, but there is a long way to go – manufacturing output is still more than ten per cent short of the level it reached in the year 2000.
If we look at the last four recessions from the perspective of manufacturing, rather than total GDP, the most recent recession wasn’t in fact the worst. If we measure from the pre-recession peak to the pre-recovery nadir, the Index of Manufacturing looks like this:
But the recovery from the latest recession has petered out. You can see it in the chart above; another way of looking at it is to compare the figure for the latest month, 35 months after the lowest month of the recession, with the equivalent months for the other recessions:
The manufacturing recovery is very slow indeed. Manufacturing may only account for about a tenth of GDP nowadays, but it is vital for exports and hence for the ‘export-led recovery’ we all hoped for a couple of years ago.