How the media overstated the Recession after 2008

ONS says Great Recession was not so deep as GDP growth upgraded

Philip Aldrick Economics Editor of “The Times

Last updated at 11:23AM, September 3 2014

Britain’s “great recession” was not as bad as had been thought and the economy burst back above its pre-crisis peak nine months earlier than estimated, according to a large set of GDP revisions published yesterday by the Office for National Statistics.

Britain’s official statistician upgraded growth for every year between 2008 and 2012. The economy is believed to have shrunk by only 6 per cent between 2008 and 2009, not by the 7.2 per cent calculated previously.

The revisions also paint a more favourable picture of the recovery. Using present GDP estimates for last year and early this year, the economy is 2.7 per cent larger than at any other point, a significant upgrade from the previous 0.2 per cent estimate. On the latest estimates, only the United States and Canada of the G7 leading nations have enjoyed a stronger rebound since 2012.

The GDP revisions, which date back to 1997, come after internal methodological improvements at the ONS, as well as sweeping changes to draw Britain into line with European standards.

The Treasury welcomed the news. “These revisions show an economy that has been growing more strongly than previously thought, with almost every quarter under this government being revised upward,” a spokesman said. “Cumulatively, growth since 2010 is now over 1 per cent stronger.” The full set of revisions will be published with the ONS’s Blue Book next month.

It is not the first time that the ONS has revised its data — it has already scrubbed the double-dip recession from the history books — but the latest upgrades are the most dramatic. To comply with European rules, the ONS has had to estimate even the economic value of illegal activities such as drug- dealing and prostitution, worth about £10 billion to the UK. In 2012, the economy was £97 billion larger than previously estimated at £1.66 trillion.

The recovery has also been swifter than thought, with all the ground lost in the recession regained by September last year. Until yesterday, that watershed was believed to have been passed this June. Although the revisions were encouraging, the recession was the deepest since the ONS started compiling data in 1948. The recovery also remains the slowest on record. Output per head continues to be weak, with the level at the end of 2012 5.1 per cent below the start of 2008.

Chris Leslie, shadow chief secretary to the Treasury, said: “These accounting changes to the way GDP is measured — for instance, to include drug-dealing and prostitution — do not mean families or businesses are better off.”