The Saturday Economist - UK recoveries compared 1930, 1980, 1990, 2008 - 2012
In this special presentation we compare the recessions and recoveries of 1930, 1980, 1990 to the current recession and recovery 2008 – 2012. In the style of NIESR. All of the recessions analysed, experienced a period of six to seven quarters of negative growth before recovery. In the current cycle, following a period of seven quarters of negative growth, four quarters of strong recovery ensued until the first quarter of 2011. Thereafter growth faltered and is now flat lining. The faltering pattern is without precedent in comparison with other UK recessions. Down load the PDF The Saturday Economist – UK recoveries compared 1930, 1980, 1990, 2010.
The recession dating from 2008 is steeper than the recessions in 1990 and 1980 and as steep as the slow down in the 1930s. The recovery pattern this time was in line with all prior recessions until the first quarter of 2011. Since then the recovery has faltered and the latest data for the first quarter of 2012 suggests the economy is flat lining. The recovery is now far behind anything experienced in the UK since the 1930s.
It is convenient to suggest the crisis in the Eurozone has affected the performance of the UK economy, however spending cutbacks, the VAT increase and the budget stance of 2011 provide a more compelling rationale for the faltering performance of the UK economy.
In 1990, the recession was relatively shallow with the economy falling by 2.2% year on year at the lowest point. After seven quarters of negative growth, the economy began a long and sustained period of recovery.
In 1980, the recession, was one of the deepest recessions with negative growth year on year of 4.2%. After six quarters of negative growth, the economy began a sustained recovery.
In the 1930s, the recession was the most severe setback with negative growth of 6.4% year on year. After six quarters of negative growth, the economy experienced a fragile recovery for over a year before returning to strong growth in 1933.
All recessions experience a recovery after six – seven quarters of negative growth. After four quarters of strong recovery, the UK faltered in 2011 and is now flatlining.
This is best demonstrated by indexing the recession and recoveries to 100. [Chart 6] Strong recoveries ensued in 1930, 1980 and 1990 but this has not been the case in the UK.
The current recovery has faltered, the UK is flat lining and output is still some 4% of the 2008 peak.
It is difficult to identify the stimulus to recovery in the current year. Government spending is restricted, household spending is constrained. Investment will await the growth in domestic demand. An economic strategy based on depreciation of sterling, net export growth, manufacturing resurgence and investment is fundamentally flawed. The economy will continue to flat line and flounder, in the absence of an alternative strategy. JKA
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