Two quarters of non-negative growth

Nigel Williams, 25 July 2013

The first estimate of GDP for the second quarter of 2013 is above the first quarter. Since 2010 there have been signs of a seasonal pattern, as successive quarters were higher, lower, higher, lower, higher, lower. If this pattern turned into a rule it would make the conventional definition of recession absurd. Requiring two successive quarters of ‘negative growth’ – that’s ‘decline’ in plain English – allows regular repetitions of small growth followed by substantial decline never to count as recession.

This quarter’s estimate is different, being a second successive higher figure, greater than the previous quarter and greater than the same three months in 2012. Then we were told that the Jubilee bank holiday was keeping growth below its rightful level and pre-Olympic sales were being held back until the third quarter of the year.

It makes a lot more sense to see recession and recovery over a longer period. The peak in 2008 included a lot of unreal money or sub-prime debt so is not a true comparison. GDP in 2013 has recovered to levels last seen in 2008 on the way down and 2006/7 on the way up. As then, the proportion of services in the economy is high to the point of unbalanced. The Office for National Statistics assigns to services a weight of 778 out of 1,000. Manufacturing and Construction both show growth this last quarter after decline in the three months before. If a recovery is to take hold and deliver wider benefits, then these sectors too must be allowed the conditions to keep growing consistently. Service industries need something to serve.