Behind the numbers of the UK economy
- 27 June 2013
- From the section Business
Twenty six million pounds is the difference between a "double-dip" recession and a normal one.
If you're confused by the various figures that are being thrown around, you're not the only one. And once you throw in revisions to data, it's hard to even know whether we were in a double-dip recession. What is clear is that the overall picture is that of a stagnant economy where even a small change can make all the difference.
So, this is what happened. A recession as defined by economists is two consecutive quarters of negative growth. A "double-dip" recession is when there is a second set of two consecutive quarters of negative growth before the economy recovers to where it was before the recession.
The Office for National Statistics revised up the GDP estimate for the first quarter of 2012 to "flat" from negative, so they say that there were now not two consecutive negative quarters of GDP. So, no double-dip recession.
Well, that's not entirely the case if you really want to split hairs. Output fell by £26m in the first quarter of 2012 from the end of 2011. So, GDP for that quarter was £376.436bn, a fall of £26m from £376.462bn. Technically, it's a fall of -0.0069%. But, if you round it to one decimal place, which is normal practice for this type of official statistic, then output is flat.
So, £26m or -0.0017% of UK output is the difference between a normal and a double-dip recession. For those of you thinking that if only one of those ultra-expensive multi-million houses had been sold in the first quarter of 2012, then this wouldn't even be under discussion, you'd be right.
And, if this is all a bit technical, that's absolutely right.
Clearly, the more important point and the most worrying is that the recession is deeper than before and we are deeper in the hole than before.
The UK economy has lost 7.2% of output from peak-to-trough in this recession versus the prior estimate of just under 7%. And, we have yet to recover 3.9% of that output versus the prior estimate of 2.6%.
ONS revisions allow for 0.2 percentage points of estimation error. That means that their estimates move around by 0.2%. This means that it may not be the end of the debate over if the UK has double dipped or not.
With a zigzag pattern of alternating positive and negative quarters of GDP, it's not surprising if we continue to "dip" in and out of negative territory.