Econintersect: The UK Statistics Authority has announced that the thrid quarter saw a return to positive GDP growth. The economy grew by 1% (quarter-to-quarter), better than expected. Using the U.S. convention of annualizing the growth, the report corresponds to about a 4% annualized growth rate, approximately double the first estimate just announced for the third quarter in the U.S.
It is believed that the unexpectedly strong thrid quarter performance may slow the injection of further monetary stimulus by the Bank of England. However, some observers caution that the number was inflated by some one-time factors.
Here are the key points from the Office for National Statistics:
- GDP was estimated to have increased by 1.0 per cent in Q3 2012 compared with Q2 2012
- Output of the production industries was estimated to have increased by 1.1 per cent in Q3 2012 compared with Q2 2012, following a decrease of 0.7 per cent between Q1 2012 and Q2 2012
- Construction sector output was estimated to have decreased by 2.5 per cent in Q3 2012 compared with Q2 2012, following a decrease of 3.0 per cent between Q1 2012 and Q2 2012
- Output of the service industries was estimated to have increased by 1.3 per cent in Q3 2012 compared with Q2 2012, following a decrease of 0.1 per cent between Q1 2012 and Q2 2012
- GDP in volume terms was estimated to have been flat in Q3 2012, when compared with Q3 2011
Below is shown the recent history for GDP in the UK. Click on chart for interactive version at Trading Economics.
The following graph from Simon Rogers at The Guardian puts everything in perspective.
The so-called double dip recession is barely a dimple on the overall progression of data over the past 5 years. In fact, when all the final revisions are in it may be that there never was a second dip at all. From the Financial Times:
Kevin Daly, an economist at Goldman Sachs, said he thought that underneath the statistical distortions, the economy had actually been growing at a sluggish rate all year. “It’s our view that once the revisions are released in two or three years’ time, there may never have been a double-dip recession,” he said.
What cannot be diminished, however, is the overall severity of the depression when compared to the granddaddy of them all over the last 80 years. GDP loss in 2007-2012 is almost as deep and appears to have the potential to take much longer than the "great one" to recover the previous high. Looking at the graph today it is easy to believe that this depression could last twice as long as the one 1930-34.
- Gross Domestic Product Preliminary Estimate, Q3 2012 (Office of National Statistics, 25 October 2012)
- UK growth signals move out of recession (Sarah O'Connor and George Parker, Financial Times, 25 October 2012)
- UK GDP since 1955 (Simon Rogers, Ami Sedghi and Lisa Evans, The Guardian, 25 October 2012)