So how sick was the UK?

 
money

You may recall that the government, the BBC (that's me, that is) and all the media made a big fuss at the end of July about official statistics that showed Britain's ghastly economic depression - the period during which output or GDP was below its previous peak - had just ended.

I warned at the time that this was something of a fiction. And we've had confirmation this morning that in fact the output of the country was back to its pre-crash level at least nine months earlier.

Well I say "in fact". But this assessment that we were not as mullered by the financial crisis as we thought is simply based on a new methodology - imported from the EU - for calculating GDP.

And if you have had the dubious pleasure of having to take this stuff seriously for as long as I have, it is reasonable to fear that in a few years' time we will find that the current way of measuring these things will be replaced by yet another set of rules - which may show that we were either richer or poorer than we thought we were.

And before I move on, I should point out that the current view that the depression ended in the third quarter of 2013 - and not the second quarter of 2014 - stems from revised figures for growth up to the end of 2012 and unrevised figures for 2013 and 2014.

It is completely plausible that those 2013 and 2014 figures will also be shown to be an understatement (survey data suggests growth has been stronger - as the Bank of England has been saying).

So even this latest view of how bad it's actually been may change before too long.

Does it matter that the Office for National Statistics (ONS) now calculates that output declined "only" 6% at its peak in the great debacle of six years ago, rather than its previous estimate that the economy had shrunk more than 7%?

Still pretty sick

Should we be anything but pleased that the British economy is probably 2.7% bigger than it was in the first quarter of 2008, as opposed to the estimate of just a few weeks ago that it is just a fraction bigger?

Isn't it fantastically good news that it now appears that the British economy has been performing a bit better than Germany's and way better than France's for some time, and only a bit worse than America's or Canada's?

Of course it is great to learn that we were not as sick as we thought we were - although, for the avoidance of doubt, we were still pretty sick (this was still by a significant margin the most painful and longest lasting slump since the 1930s).

But the big thing is that the official view of the health of our economy has an impact on the behaviour of businesses and consumers.

Thus, if the oracle that is the ONS had made clear a year ago that the UK had been performing for a while significantly better than many competitor economies that might have encouraged British firms to invest more and overseas investors to put more of their cash in the UK.

And that would have made all of us richer.

Or to put it another way, the perception that we are doing well helps us to perform even better, to become richer.

And of course the corollary also holds: if we are perceived to be in dire straights, no one wants to spend or invest, and we become poorer.

So the official description of our economic performance can have a significant impact on the subsequent performance of the economy.

For the avoidance of doubt, I am not claiming that we can magic ourselves richer simply by pretending that we are.

But Keynes had a point when he said that animal spirits - how we feel about ourselves - has an impact on economic behaviour that determines our prosperity.

To be clear, I am not trying to put the boot into the ONS. It has a difficult job to do, and in making its revisions is simply trying to provide more reliable information.

But you may understand that I periodically feel a bit grumpy and bewildered in having to tell you one day that the UK has gathered - by analogy - four bronzes in the economic Olympics, and then a few weeks later learn that the medal haul was in fact significantly different and better.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +2

    Comment number 49.

    36 ~ Following on ~ the question asked is subject to perspective and the realities of.... wealth creation, which is its own kettle of kippers. There are serious problems with accounting practice quid pro quos and the ideas of practical honesty.

    The government lost an immense growth in revenue, currently borrowing around £1700 per every person, annually. That is the perspective of lost growth.

  • rate this
    +6

    Comment number 48.

    @30.kappa_cephei
    "I wonder why?"
    --
    Is it that all the pinkoes have to go and make dinner and take care of the kids in the evenings, and all the Daily Mail readers have only just finished swanning around on the golf course exchanging brown envelopes with local councillors?

  • rate this
    +6

    Comment number 47.

    Greg Heath .. Wonder what our Real Unemployed rate is, if you include all the people who are "Self Employed" because they cant find a job and survive on just "Tax Credits". I know a lot of former Manager and Executives in this situation. Every figure published has a story behind it if you want to look at it.

  • rate this
    +20

    Comment number 46.

    Sadly most of the recent growth in GDP has disproportionately gone to the top 1% who’s wealth has nearly doubled during the period of the recession while most of the populations wealth has remained static or fallen. Yes our economy might be growing faster than Germany but we started at a lower point and is it sustainable. People on low incomes spend 90%+ of their income to stimulate the economy

  • rate this
    +6

    Comment number 45.

    Nope, still not willing to buy an overpriced house here.

    I may as well rent and buy a holiday home somewhere other than the UK.

  • Comment number 44.

    All this user's posts have been removed.Why?

  • rate this
    0

    Comment number 43.

    The credit crunch was a lie, fabricated to allow the politicians to transfer billions of our hard earned money directly to the banks, which they then paid themselves in bonuses. The bankers are the Mafia of our nation.

  • rate this
    +1

    Comment number 42.

    @29 - there has been no austerity.

    There has been a shift in spending from areas the current Government don't want to spend into areas they do, which is no different to when any party gets into power.

  • rate this
    +42

    Comment number 41.

    Things were bad in 2008 when ATMs when 24 hours from drying up but back then people weren't so nasty. We are now told things are getting better but I don't believe it. Borrowing is up and the deficit has widened over the last 4 years. Food bank use has quadroupled and discount shops like Aldi, Primark, Lidl and co are booming and payday loans are up 42%. It rather paints a different picture.

  • rate this
    +6

    Comment number 40.

    37. BBC LEFT WING BIAS OK
    Just this week, the surge in Construction has been reported, which is EXCELLENT news but its almost been buried.
    ____

    God, are you naive.

  • rate this
    +2

    Comment number 39.

    We are only £1.2 Trillion in the Red, which so long as interest rates don't go up will only take us 250 years to pay off, We don't make anything, so the whole stability of the economy depends on the Bankers behaving themselves and not get greedy again. First time buyers have got to wait until they are about 40 to get a house, and be retiring when they have paid for it. everything is chipper.

  • rate this
    +60

    Comment number 38.

    And the BANKERS are still laughing at both the Government and the good British public. We have allowed them to get away with the crime of the century, they are too powerful!

  • rate this
    -1

    Comment number 37.

    The reality is that the MEDIA and yes that includes the BBC, have made things far worse than they needed to be.

    Spouting negative news WILL change peoples minds about spending money but I suppose good news isn't something you like reporting.

    Just this week, the surge in Construction has been reported, which is EXCELLENT news but its almost been buried.

    And back to the subject the answer is NO.

  • rate this
    +2

    Comment number 36.

    The damage which has been done was/is to investment in the economy and diminishment of incomes during a very considerable period. Incomes were the problem and remai the problem.

    Run away asset inflation, a simple transfer of wealth, reached criminal proportions and accounting rules allowing this fell out the rear end of a mongrel. There is immense asset inflation and deflation of incomes.

  • rate this
    +3

    Comment number 35.

    Strip out the people waiting on a phone call for a days work(not unemployed so not taken into account) and you have an economy that is doing well for some but failing the vast majority.
    The Tories have managed to turn the UK into the 1930's. Then 100,000's queued at the factory gate or street corners in the hope of a days work now they wait by the phone.
    But we are all in this together.

  • rate this
    -1

    Comment number 34.

    @16 BlackWednesday "...banging on..."

    You make a perfectly valid point, but you are inconsistent. The availability of the "next loan" to the economy (government) depends on its aggregate income (correlated to nominal GDP), not per capita. Meanwhile, the "next loan" to an individual or company depends on their actual circumstances, so per capita (mean) income is less relevant than the distribution

  • rate this
    0

    Comment number 33.

    as for government, I do not need rich wet behind the ears boys telling me what to do; my morals, scruples and principles which shape my philosophy does very well without thugs doing one thing and preaching to us; we have a monarchy who gets richer by the minute just from EU farming subsidies, while homelessness is increasing - what does this say about our elitist society?

  • rate this
    0

    Comment number 32.

    Sounds like we're in good enough shape to fully commit into Europe and the EU from a position of financial strength. Happy Days

  • rate this
    +6

    Comment number 31.

    It's not sick, it's dead. Murdered by bankers and incompetant politicians.

  • rate this
    0

    Comment number 30.

    @24

    Statistics can never lie.

    And to call the BBC the voice of a tory government is laughable - I'd be utterly shocked if less than 80% of BBC reporters/presenters were not dyed in the wool Labour voters.

    Haven't people noticed on HYS that a majority of posts during the UK daytime tend be of the left wing persuasion and in the evenings a swing to the right.

    I wonder why? LOL

 

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