Cast your mind back to early 2013. The economy’s recovery from the deep recession of 2008-09 had stalled for a second time and there was much speculation that Britain was on the brink of a triple-dip recession.
It now turns out that the economy was under no such threat. The latest data revisions from the Office for National Statistics show that growth was weaker than previously thought in 2010, but stronger by an average 0.4 percentage points in each of the next three years. There was no double-dip recession, let alone a third setback.
This revisiting of recent economic history is of more than academic interest. For a start, it suggests that it is unwise to get too excited about the flash estimates of gross domestic product that are published by the ONS on the basis of incomplete information. These are often subject to significant revision.
More importantly, the revisions reveal an economy that was not as deeply scarred by the recession as previously feared. Estimates of the UK’s potential output need to be revised up. Productivity performance, while still not great, also looks a bit better.
But these improvements need to be put into perspective. Andrew Goodwin, a UK economist for Oxford Economics, said that after the latest revisions GDP is 13.4% below where it would have been had its pre-crisis trend continued. Previously, the gap was 14.7%. Goodwin said that instead of productivity growth being flat, it was “grindingly slow”. The gap with the pre-crisis trend remains about 18%.
Clearly, George Osborne will be pleased by the upgrade to the economy’s performance in the last parliament. There is, however, a sting in the tail, which is that stronger growth should have led to more rapid deficit reduction. The fact that it did not is a concern.
