27 Jun 2013

The sunlounger recovery, not the double dip

The really striking thing about the “there was no double dip” GDP revisions that some argue we should be celebrating, was the poor light it shed on Labour’s years in office.

I’m not even clear that learning that Gordon Brown and Tony Blair between 2003 and 2007 presided over growth averaging over four years more than 3.5 per cent (massive, heroic, credit-fuelled, dotcom boom-style growth rate), would be considered the bad news for Labour’s reputation that it clearly is.

The further revision made to the bust years showed the peak to trough fall of 08-09 had been revised up to an incredible 7.2 per cent from the already grim 6.3 per cent. So the Labour boom was more explosive and unsustainable, and the bust was even grimmer.


The recovery from that in Brown’s last quarter (shared with the coalition) was revised back up to a thumping 1 per cent. But the big picture is that the economy is still 3.9 per cent below its peak, unprecedented in history and internationally. We have had somewhere between a V-shaped, a W-shaped and and L-shaped recovery.

If you look at the chart, I would call it a sunlounger-shaped recovery – or perhaps a recliner recovery, if you like alliteration.

There was a sharp rebound for a year under heavy stimulus. But around mid-2010, the footrest of the sunlounger flattens out.

Either the chancellor was very unlucky with the eurozone crisis or, as Ed Balls might point out, his austerity and cuts to capital spending contributed to the flattening.

Alternatively it was a hangover from the bust. This is the argument that will dominate the politics of the shape of the weak recovery in Britain.

Only an idiot would celebrate the disappearance of the double dip for economic reasons (although clearly it’s very handy in political scrapping terms for the chancellor). Let me explain why.

A run of three quarters – Q4 2011, Q1  and Q2 2012 – was -0.1, -0.1, -0.4. This morning that was revised to -0.1, 0.0, -0.5. Not a double dip, but of no arithmetic difference.

Actually at two decimal places it is -0.11, -0.01, and -0.50 – although you’d have to be a particularly dismal scientist to search for a double dip at two decimal places.

But how about this? If you take table A2 from the Quarterly National Accounts in April 2013, and compare with today, the Q3 2011 to Q2 2012 fall in GDP was revised from -0.57 per cent to -0.61 per cent (£361,599 to £359,538, revised to £376,862 to £374,550). So yes, there was no double dip. But the economy performed worse over three quarters.

A minor debating point re. crowing about economic statistics, yes. And yes, I should have better things to do. But perhaps it shows it’s time to move the definition of recession on from one invented on the back of a napkin by famous economist Arthur Okun to aid President Lyndon Johnson’s re-election campaign in 1967 .