How much GDP growth would be ‘half-decent’?


by Sunny Hundal    
8:50 am - October 25th 2012

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The UK’s quarterly GDP figures are out today. They have been negative for the few quarters – hence we are in a double-dip recession.

So what would be ‘half-decent’ for today? Tim Montgomorie at ConHome says a 0.4% rise in GDP would be half-decent.

I find this extraordinary. It’s like saying that just because you’ve been shot in the face repeatedly, a stab in the face instead is welcome.

The Tories will jump on any growth in GDP figures as positive. Here’s why this is rubbish.

The Q3 figures will be artificially inflated:
- the bounce back from the extra bank holiday in the previous quarter (which reduced growth by approx 0.5%)
- Olympic ticket sales (expected to add around 0.2%).

Plus – since around +0.6% would be trend growth (hat-tip @graemewearden), 1.3% would be ‘half-decent’.

Less than that and it means our economy is still growing very slowly overall.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


Turned out at 1% – which was significantly above the consensus. I think arguing that annualised growth needed to be at more than 5% for this quarter is stretching it a bit to be honest.

Olympic ticket sales (expected to add around 0.2%

According to ONS positive and negative impact of Olympics cancelled each other out. No net impact on figures.

The cancelling out would be from Q2 2011 when I think it was when the tickets were sold and Q3 2012 when they are recorded as a sale. Ticket sales still add a one-off 0.2% to this quarters growth and can be discounted as it does not reflect underlying conditions. Subject to revisions probably to the upside an underlying quarterly growth around 0.5% is reasonable but not spectacular. Subdued construction is the big factor depressing the economy and strangely enough that is the sector that the government can easily do something about. The flurry of announcements in recent months of trying to get construction growing is an indicator that they realise construction holds the key to an even next GE campaign or electoral oblivion.

Try telling the ‘good news’ story to the redundant workers at Ford, Kimberly Clark, Seven Seas, etc.
They’ll be overjoyed.
No doubt A4E will have them all back in employment before the month is out.

@barriej

Do you have any idea how many jobs come and go in any one quarter?

6. gastro george

@Shrugged

… I know, and it’s so positive that skilled engineers will now be re-employed as part-time building labourers or whatever …

The 1% means little other than we are no longer in recession. With revisions still to come it could rise or fall by up to several tenths of a percent. This is still largely irrelevant.

What is important is growth over a longer period. While politicians and journalists live for each individual set of figures they miss the wider trend.

If the next few quarters return to something like 0.2% then it means that the 1% is a blip and the economy is still stagnating. Until then lets just say that it is a step in the right direction but there’s a very long way still to go.

8. Northern Worker

It’s so typical of hacks and politicians to get hung up on one, single, rather ambiguous measure of national economic progress. There’s more to the economy than GDP.

For a start it includes government expenditure. So, if our Tory overlord borrow a shed load of money, which they have, and spend it, presumably it shows up as GDP.

And GO’s and other’s explanations of why GDP is up seem very lame. The Olympics? London was empty; shops in London were empty; tourism was down. The real Olympic money was spent ages ago paying for infrastructure. The Olympics was a one-off. What now?

What about unemployment? What about the gap between inflation and wage increases? What about a real measure of standard of trends, which must surely be down?

9. Northern Worker

Just read this on Tory, John Redwood’s website confirming what I’ve just written:

They fail to tell us that increases in real public spending accounts for twice as much as the Olympic tickets, or 40% of it.

The 0.1% increase from manufacturing and 0.1% increase from water was offset by the 0.2% fall from construction. Services account for the 1% gains overall. These split 0.4% from the public sector, and 0.6% from various parts of the private sector, including hospitality related to the Olympics.

Why do most of the commentators persist in distorting what is happening.? Why don’t they point out that increases in real public spending have made a positive contribution to GDP as officially calculated all this year, and this quarter the gains are large. Some of the private sector service and manufacturing gains are the result of catch up from the previous quarter which enjoyed the extra bank holiday.

Hopefull.

11. Keith Reeder

“The 1% means little other than we are no longer in recession.”

Why do we need two consecutive quarters of negative growth to be IN a recession, but only one quarter of positive “growth” (a word I use ironically here) to be back out?

No, I think I’ll wait a while longer before I start thinking of us as being “no longer in recession”, thanks…

11. Keith Reeder

““The 1% means little other than we are no longer in recession.”

Why do we need two consecutive quarters of negative growth to be IN a recession, but only one quarter of positive “growth” (a word I use ironically here) to be back out?

No, I think I’ll wait a while longer before I start thinking of us as being “no longer in recession”, thanks…”

Becasue the definitions are a purely political construct invented by and for a US President who wanted to be able to say thatthe country was out of recession.

You are perfectly right that the criteria should be the same, but it is too politically useful to make it more difficult to get into, as opposed to get out of, recession

In the present case the In-Out dichtomy is virtually meaningless. Regardless of the monthly figures, the economy is clearly doing little more than stagnating with occasional blips in either direction

13. Chaise Guevara

@ 12 Mark

“Why do we need two consecutive quarters of negative growth to be IN a recession, but only one quarter of positive “growth” (a word I use ironically here) to be back out?”

Because if a recession is defined as two consecutive negative quarters, one positive quarter means you no longer meet the criteria.

You’re right that it’s a pretty arbitrary measure, but it’s internally logical.

It’s a shame we don’t have regional figures, as they would be more illuminating.

I can’t get over the feeling that some people are rather frustrated by the idea of the recession ending becuase they are more interested in the discomfiture of the Tory party than in prospects improving, even if only ever so slightly, for millions of people in this country.

I’m not thanking the Tories, I am not counting on anything, and I will believe we are having a recovery when I really see it, but yes, I am glad. I would be less happy if growth was 0.5%, 0% or -1%. For those of us really struggling rather than comparatively comfortable off, this is better than nothing. I don’t expect members of the latter group to understand or care much about that, though.

@15. Lamia

Can’t speak for everyone, but in my case it’s not carping about a recovery being bad for the opposition/good for the Tories, but believing ther is not a real recovery: we’re just bumping along the bottom, with, as this time, occasional good spots.

17. gastro george

@15 Lamia

“Dead cat bounce”. Even in depressions, figures will occasionally show an anomalous rise. It wouldn’t surprise me if the last quarter also shows a small rise, but wait until the post-Christmas hangover.

There’s too much focus on short-term figures (don’t we always carp about the short-term focus of senior management), better to look at the annualised figures, which are not pretty.

In any case, your argument comes close to a wartime “keep calm and carry on” cliché. We’re justifiably arguing that the figures should be better, not hoping for bad figures to attack the Tories politically.

“In any case, your argument comes close to a wartime “keep calm and carry on” cliché.”

No it doesn’t.

” It wouldn’t surprise me if the last quarter also shows a small rise, but wait until the post-Christmas hangover.”

Keep your fingers crossed that there is one, and a bad one.


Reactions: Twitter, blogs
  1. sunny hundal

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  2. Matthew S. Dent

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  3. Maidenhead Labour

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  4. House Of Twits

    RT @sunny_hundal How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/ueZs8Drk

  5. Rosie

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  6. Jason Brickley

    How much GDP growth would be ‘half-decent’? http://t.co/DTVcrndF

  7. Matthew Tomlinson

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  8. keith ferguson

    RT @sunny_hundal How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/ueZs8Drk

  9. keith ferguson

    http://t.co/oqXXZe0m

  10. Antonio Barbaro

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  11. leftlinks

    Liberal Conspiracy – How much GDP growth would be ‘half-decent’? http://t.co/vfMtrb3z

  12. Threadbare Panda

    How much GDP growth – figures out today – would be half-decent? At least 1.3%. Here's why http://t.co/JCSg6Ibb

  13. Alex Braithwaite

    How much GDP growth would be ‘half-decent’? | Liberal Conspiracy http://t.co/lce81bYT via @libcon

  14. BevR

    How much GDP growth would be ‘half-decent’? | Liberal Conspiracy http://t.co/PBcVubKP via @libcon





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