Published: January 25th 2012 - at 8:29 amToday’s economic figures will simply confirm UK’s “lost decade”
At 9.30 this morning we’ll get our first look at GDP figures for the last quarter of 2011.
They will almost certainly be very close to zero – and whilst the political debate will be shaped by whether they are just about negative or just about positive, they won’t (barring a really unexpected result!) tell us a great deal we don’t already know.
The expectation of both the OBR and independent economists (as surveyed by the Treasury) is that 2012 will be a year of very low growth overall.
The simple fact is that the current recovery is historically weak – as best demonstrated by the below chart from NIESR:
But one often missed fact is this – 2012 is set to be a year of economic contraction, according to the OBR. Whilst headline GDP growth is forecast to come in at 0.7%, the ONS forecast that the population of the UK will grow by 0.8%.
In other words per capita GDP (GDP per head) is set to fall this year.
Looking at GDP per capita matters and tells us an awful lot more than simply looking at the headline numbers. If GDP were to grow by 5% but the population grew by 10%, people won’t be 5% better off – they’d actually be worse off.
2012 is set to see the first contraction in GDP per capita since 2009. On this measure we are set to double dip.
Indeed on the OBR economic growth forecasts and the ONS population projections it will be 2016 before GDP per capita returns to 2007 levels. In GDP per capita terms we
really are set for a ‘lost decade’.
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A longer version is at ToUChstone blog
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Duncan is a regular contributor. He has worked as an economist at the Bank of England, in fund management and at the Labour Party. He is a Senior Policy Officer at the TUC’s Economic and Social Affairs Department.
· Other posts by Duncan Weldon
Story Filed Under: Blog ,Economy
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Reader comments
Correct.
A 0.2 decline.
This is subject to revision. But it is unlikely to end up a above zero.
Just a short question – do we usually expect growth to be higher in Q4 than other periods due to retailers getting christmas trade?
“Blah, blah…lost decade”
And the Labour Party will get the blame – the polls show what party activists seem unwilling to accept is that this government’s policy direction is popular – just Labour used to be before Gordon Brown.
Things like the benefits cap, immigration and Europe show the Labour Party and their activists are so out of touch it is staggering after 13 years of government.
Not the Labour voters though – they support a lot of the government changes and if the party won’t accept that then who do they represent?
If Labour are serious about offering the electors in this country a different government then we need more positive contributions to the debate and just less negativity.
@ Duncan
Whilst what you say is true, why is it a surprise?
In previous recessions the UK hasn’t been weighed down by anywhere near as much debt (public+private). It is really a shock that after a debt crisis people are going to pay down debt, which the UK has barely started to do (again, private+public).
UK growth isn’t really any different from other highly indebted countries. The US, which has had a massive drop in outstanding debt is doing better for exactly those reasons…there is more room for credit expansion, where there isn’t in the UK at 500% total debt/GDP.
I love the fact that this time last year, they were blaming the cold weather for negative growth, and this time around they’re blaming the *warm* weather for negative growth (because it meant gas and electricity production fell).
Never mind though – no doubt the recovery will get under way just as soon as the weather stops being either cold or warm.
No time for a novice,
How bang on was that statement, Osbourne and Cameron are out of their depth
its clear they dont know what they are doing.
They need to fuck off and take the rest of those useless coalition pricks with them.
Hi Duncan
You titled it ‘UKs lost decade’.
But have you stats comparing the UK to other similar countries – I would imagine alot of the factors are global, such as globalisation causing a shift of jobs and hence GDP to China etc: as well as increasing efficiency through IT technology in the office and robots in the factory.
On a thread on LC last week many people whinged about Maggie killing the coal mining industry – and a quick google showed that the exact same had happened in Germany!
Global effects in that case, at least.
You’re dreaming.
Things won’t be that good.
@3 – That’s right, keep denying it’s your party’s fault. Anything but the truth.
4 Tyler
The only surprising thing to my mind is that the Coalition government misunderstood the economy so completely when they first came to office. They ignored the private debt overhang, and went ahead with public spending cuts in the expectation of a revitalised private sector filling the gap. That hasn’t happened because, far from investing for growth, the private sector has opted to pay down debt and hoard cash. Consequently we had net saving going on in both the private and public sectors at the same time, together with a large trade deficit. The result, unsurprisingly, is recession. Some of us – including Duncan – have been predicting this for quite a while.
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