247

Actually, it doesn’t matter. It really doesn’t, not in the scheme of things. Did the UK have a double dip recession or not, who cares? What we know is that the UK economy has performed poorly. To focus on whether we had a double dip is to focus on sound bites over reason.

But…just to set the record straight, here is the story so far, told briefly – because it is not that important – but hopefully accurately, because it is perceived as important and myths are circulating about this issue.

In January 2012, the ONS released its first estimate of GDP for Q1 2011. It estimated a contraction of 0.2 per cent. Its first estimate of GDP for Q1 2012 was for the economy to have also contracted by 0.2 per cent. As for Q2, it first estimated a contraction of 0.5 per cent.

So remember that, based on first estimates, the UK saw growth of minus 0.2, minus 0.2 and minus 0.5 per cent in Q4 2011, Q1 2012 and Q2 2012.

There then followed a period of revisions. By August of last year, ONS data was telling an even more alarming story with minus 0.4, minus 0.3 and minus 0.5 per cent growth.

Now look at the latest data, out a few days ago, and the story is as follows: minus 0.1 per cent, minus 0.1 per cent and minus 0.4 per cent.

In short, things don’t look anywhere near as bad.

The ONS itself tried to put the record straight: “The falls in output from 2011 Q4 to 2012 Q2 are all modest, “ it stated, adding: “In total the economy contracted by 0.5 per cent. The decline in output in the first two of these quarters is particularly small. When growth is very weak, the difference between, say, estimated growth of 0.1 per cent and -0.1 per cent in a quarter is actually within the statistical margin of error.

The contraction in the economy in the following quarter, the April-June period of 2012, is explained by the additional bank holiday which was called in June as part of the Queen’s diamond jubilee celebrations. The impact of such special factors should not perhaps contribute towards a recession.”

The National Institute of Economic and Social Research (NIESR) looked at much the same issue. Simon Kirby from NIESR in a report published today said: “Much of the attention focused on the avoidance of a ‘triple-dip’, rather than another quarter of relatively weak economic growth. Revisions to data mean that it is increasingly unclear whether there was even a ‘double-dip’.

As we have noted many times before, obsessing about a couple of quarters of minute falls in output distracts us from the clear trend: that of a stagnating economy.”

To ask whether the UK had a double or treble dip is, in fact, to ask the wrong thing. What we can say is that the UK’s output is some 2.5 per cent below the peak recorded in early 2008. It is the longest downturn ever recorded, and that is surely what matters.

© Investment & Business News 2013

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s