Today ONS has revised the GDP growth figure for Quarter 1 2012. In rounded percentage terms, it has gone from minus 0.1% to zero. It is a tiny change, but there is a danger false significance will be attached to it. Some commentators define a recession as two quarters of negative growth and will conclude that the second leg of the so-called “double dip recession” has been revised away.
In fact, the pounds million figures also published today show that GDP was lower in Q1 2012 than in the preceding quarter – negative growth – albeit by an amount, £26 million, which is insignificant in an economy producing round about £1.4 trillion a year.
More importantly, though, this kind of discussion distracts from more significant issues. Actually, when it publishes the GDP estimates, ONS never pronounces on whether the economy is in or out of ‘recession’. It’s a term that has no official status. Instead, we recommend looking at what’s been happening to the economy over a period of time.
Recent years saw a major fall in output from the start of 2008 to the middle of 2009. Today’s figures estimate that fall at more than 7%. Since then, GDP has recovered to an extent, following a bumpy path on a plateau with a gently rising trend. So far, something less than half of the fall has been regained.
The picture presented by these movements is important and needs to be taken seriously. By comparison, whether output is up a bit or down a bit in one particularly quarter scarcely weighs on the scale.
Joe Grice, ONS Chief Economist