GDP revisions show that recession was much worse than we thought

New ONS figures confirm first quarter GDP growth of 0.3 per cent, but revisions to previous releases show that the crash was more severe that we thought. GDP is presently around four per cent below the pre-crisis peak, rather than 2.5 per cent.

  • The peak to trough fall of the economic downturn in 2008/09 is now estimated to be 7.2%.
  • In Q1 2013, GDP was estimated to have been 3.9% lower than the pre-financial crisis peak in Q1 2008. Previously GDP was estimated to have been 2.6% lower for the same period.

The ONS has also revised away the double dip recession, as the recessions at the end of 2011 and the start of 2012 did not happen.

All in, the revisions are negative. Overall 2007 to 2012 growth has been revised down by 0.26 percentage points.

Total business investment shrunk by 1.9 per cent in the first quarter, from a 0.8 per cent fall in the previous period. Economists had predicted investment to drop by 0.4 per cent.

Sterling is losing strength against the dollar on the news, hitting a three week low.

Jeremy Cook, chief economist at the foreign exchange company, World First, said:

This data release highlights the problems that Britons are currently facing in a nut shell. Levels of disposable income have fallen to the lowest since 1987 as inflation bites at wage packets whilst savings ratio falls have shown that people are using life savings to keep their heads above water.

Whether the UK entered a double-dip or, as today’s numbers show, it didn’t matters little to the man on the street who is seeing large falls in real term wage growth as a result of the lack of business output.