Friday, July 25, 2014
Back to the peak
Posted by David Smith at 11:30 AM
Category: Thoughts and responses

For all the caveats about per capita GDP - not something that usually gets much emphasis in the policy debate - this was another good GDP number, following on from the symbolic uprating of UK growth forecasts by the International Monetary Fund on July 24.

GDP rose by 0.8% in the second quarter and is now 0.2% above its pre-crisis peak in the first quarter of 2008. After falling by 7.2% in 2008-9, the worst post-war recession, GDP needed to rise by 7.8% to get back to that pre-crisis level, which may of course have included an element of unsustainable growth. It has now more than done so.

The economy began to grow, tentatively, in the fourth quarter of 2009, so has taken four and a half years to grow by 8%. It is a long time but, given the headwinds, perhaps growth averaging a little under 2% a year, pending revisions, was the best we could expect.

The latest figures show that the service sector grew by 1% in the second quarter, while production rose by 0.4% and construction fell by 0.5%. The construction number looks too weak against the surveys (the the Q1 flood effect), while the manufacturing rise of only 0.2% may also be revised up over time. More here.