Saturday, February 4, 2012

Do not try this at home! UK GDP growth slow to recover

United Kingdom GDP has been shrinking or flat since Q1 2008.

We like to complain here in the US about the economy. But the recession could have been a lot worse. Take the example of Britain, Wales, Scotland and Northern Ireland: collectively the United Kingdom. Rather than apply some stimulus during the recession, they decided to cut back. The Conservative led government believed cutting the debt would lead to a boost in business confidence and a confidence led recovery. Boy where they wrong.

The British economy has been shrinking or flat since the first quarter of 2008. In one 12 month period their economy shrink by more than -7%. They also had a double dip of negative growth. Currently growth is flat.. That is four straight years of recessionary impact.

This chart shows the current UK recession against the longer term GDP trend from 1955. You can see a severe drop since 2007.

A better example is the quarter to quarter growth since 1997. You can see five quarters of negative growth followed by eight quarters of growth below 0.5%. The most recent quarter estimate was a negative -0.2% in the 3rd quarter of 2011.

Luckily, here in the US we spent $787 on stimulus. China, France, Japan and Germany also had spending increases. It looks like we all made a great policy choice that saved millions of jobs.

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