Published on 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 .

6 reader comments

  1. Jonathan da Silva says:

    It’s probably New Labour/Clinton/Rahm Emanual’s biggest contribution to politics the preference of rhetoric over argument. Balls loved going on about double/triple dips even though it amounts to no more than fetishising line shape on a graph. Indeed I note the debate about sun-loungers now.

    Hence policies are chosen for their headlines like cracking down on people whose English is poor. Even though all these things generally cost more elsewhere or are actually unenforced. The problem is as anyone who ‘reads’ The Times or any other tabloid people get their news from rags who want politicians to give them easy headlines/rhetoric. Like those who applaud ‘help to buy’ when no sane economist would.

  2. Chris C says:

    Obviously this is just political deckchair moving by Gideon to win a minor point at PMQs – no recession on my watch blah blah blah. No-one is fooled. However economics has always been about public perception and herd mentality, rather than sane thinking. However there is certainly a load of Balls being said by the past crew about political hoodwinkery. Broon may be hiding (apparently he’s still an MP – bring on Scottish independence) but him and fat Eddy we’re the cause of all this.

  3. Philip Edwards says:

    Faisal,

    Whatever happened to “a dead cat bounce”?

    Truly, you economists live on a different planet from humanity…….
    :-)

  4. Richard says:

    What a terribly written article. Almost trying to mystify the confusing world of economics even further. It was the second paragraph that really did it for me. Lost forever! We used to have a society for clear English in this country. It would be great to understand this in clear terms although the article seems to suggest towards the end that all of these statistics don’t really matter anyway. More clarity, less flamboyant enthusiasm, 4 News please.

  5. Andrew Dundas says:

    Should any government have ever been micro-managing our Banks? (with hind-sight, we can see it’s difficult). Had they done so, GDP growth would have been lower and taxes would have stayed higher too.

    Until Autumn 2008, nobody said government should interfere. Certainly neither Osborne nor Lord Snooty wanted State supervision of Banks’ loan books. Nor did anyone scream that RBS shouldn’t touch ABM-Amro, let alone buy it.

    The mantra then was that the Labour Government shouldn’t interfere with The City. And that the FSA was an unnecessary body that should stop inhibiting “City entrepreneurs”. Now the mantra is that they didn’t intervene enough.

    Moreover, with tax revenues gushing in from “Britain’s world-beating banks” we were all beneficiaries of the Finance led boom.

    Isn’t hindsight wonderful?

  6. Robert Taggart says:

    A sunlounger recovery ? – Fine.
    A sunlounger economy ? – Better !
    Blighty needs to take its foot off the accelerator – to all those ‘headless chickens’ rushing to and fro going nowhere in particular – CALM DOWN DEARS !

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