The National Institute of Social and Economic Research’s latest monthly estimates of GDP show the UK economy emerging from recession in Q3 2012 – up 0.8 per cent; the underlying rate of growth, however, is weaker, with the boost in growth due in part to the Olympics.
NIESR today said (pdf):
Our monthly estimates of GDP suggest that output grew by 0.8 per cent in the three months ending in September after growth of 0.1 per cent in the three months ending in August 2012. This is the most robust rate of growth since the three months to July 2010.
However, the strength of the figure for the three months to September is largely an artefact of special events (see note below). Economic growth is expected to be at a significantly slower pace in the coming quarters.
[Note: The underlying rate of growth is weaker than these figures suggest. Stripping out the effects of special events (the reversal of the negative effect from the additional bank holiday in June 2011 and the allocation of Olympics ticket sales from last year) suggest underlying growth is closer to 0.2-0.3 per cent per quarter.]
As Figure 1 below shows, this remains by some distance the most prolonged dip below a pre-recession peak compared to the 1930-34, 1973-76, 1979-83 and 1990-93 periods, with the economy more than 3 per cent smaller than at the start of the 2008 recession.
The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed be low its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2014.
As shadow financial secretary to the Treasury Chris Leslie said, the need for a plan on jobs and growth is as urgent as before – with the chancellor as devoid of ideas as ever:
“Even if these forecasts come true our economy will still be 0.2 per cent smaller than it was a year ago. That’s why, after two years of flatlining and with borrowing now rising to pay for the costs of economic failure, we need urgent action on jobs and growth to make up the ground we have lost and prevent more long-term damage being done.
“Sadly George Osborne’s complacent speech this week didn’t once mention growth or a single new policy to create the jobs and growth we need. And with the IMF warning that the government’s deep cuts and tax rises are having a bigger impact on the economy than previously thought, the need for a change of course is growing by the day.”