8th September 2014 by The Harried House Hunter
The UK 2008-09 recession may no longer warrant the label “great”. GDP is now estimated to have declined by 6.0% over five quarters in 2008-09 versus 7.2% over six quarters previously. The Office for National Statistics (ONS) has repeatedly claimed that the 2008-09 recession was the deepest in post-war history. This remains true – just – on the revised data: the 6.0% drop compares with a 5.9% reduction in the 1979-82 recession.
A comparison of the two recessions, however, should take account of North Sea oil and gas production, which rose in 1979-82 but fell in 2008-09, for reasons unrelated to the economic cycle. Excluding such production, the decline in output was marginally larger in 1979-82, i.e. 6.3% versus an estimated 6.2% in 2008-09 – see chart*.
Non-North Sea output, moreover, has risen by significantly more than overall GDP since the recession trough – an estimated 10.5% versus 9.3%. Output is still lower, relative to the pre-recession peak, than at the equivalent point in the 1980s but the shortfall is modest – an estimated 2.1% – and could easily disappear in future ONS revisions.
The new data suggest that non-North Sea output began falling in the third quarter of 2008, one quarter later than overall GDP, i.e. the onshore recession lasted four rather than five quarters. The later entry fits better with monetary developments: real narrow money started to contract in early 2008 and typically leads activity by about six months.
*Non-North Sea output is measured by gross value added (GVA) excluding oil and gas. GVA equals GDP minus the difference between taxes on production and subsidies. GVA ex oil and gas for 2007 Q1 to 2014 Q2 was estimated from the GDP revisions and previously published data.