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The Saturday Economist : UK recoveries compared 1930 2012

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UK recession and recoveries compared, The Saturday Economist, Uk Economics analysis.

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The Saturday Economist : UK recoveries compared 1930 2012

  1. 1. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday April 28th 2012 Special Feature - UK Recoveries compared In this special presentation we compare the recessions and recoveries of 1930, 1980, 1990 to the current recession and recovery. The recession dating from 2008 is steeper than the recessions in 1990 1980 and as steep as the slow down in the 1930s. The recovery pattern this time was in line with all prior recessions until the first quarter of 2011. Since then the recovery has faltered and the latest data for the first quarter of 2012 suggests the economy is flatlining. The recovery is now far behind anything experienced in the UK since the 1930s. It is convenient to suggest the crisis in the Eurozone has affected the John Ashcroft is Chief Executive performance of the UK economy, however spending cutbacks, the VAT of pro.manchester, a director of increase and the budget stance of 2011 provide a more compelling Marketing Manchester, a member rationale for the faltering performance of the UK economy. of the Greater Manchester Chamber of Commerce, the AGMA Business Leadership Council and a visiting professor atDon’t miss MMU Business Schoolthe weekly specialising in Macro Economics and Corporate Strategy. e-mail London School of Economics London Business School with a Join me - John Ashcroft - on LinkedIn today, follow @jkaonline PhD in macro economics from MMU.
  2. 2. UK GDP - 2008 - 2012 Recoveries Compared 3.5 2.9 2.9 2.5 1.8 1.8 1.6 0.7 0.3 0.3 0.4 0 0 -0.8 -1.2 -1.8 In 2008, the UK experienced a sharp recession -2.3 with seven quarters of negative growth followed by a strong recovery. The recovery faltered in the -3.5 -3.7 first quarter of 2011. The economy is now flatlining. -5.3 -5.1 -6.0 -7.0 -6.6 2008 2009 2010 2011 2012 % change year on year Recoveries Compared May 2012
  3. 3. UK GDP - 1990s cycle Recoveries Compared 5.0 In 1990, the recession was relatively shallow with 4.3 the economy falling by 2.2% year on year at the lowest 3.8 point. After seven quarters of negative growth, the 3.2 economy began a long and sustained period of 2.8 recovery. 2.5 2.5 2.1 1.5 1.5 1.3 1.0 0.3 0.4 0 -0.4 -0.3 -0.7 -0.6 -1.3 -1.2 -1.4 -2.5 -2.2 -3.8 1991 1992 1993 1994 % change year on year Recoveries Compared May 2012
  4. 4. UK GDP - 1980s cycle Recoveries Compared 5.0 4.8 In the1980s, the recession was one of the deepest 4.0 recessions with negative growth year on year of 4.2%. 3.9 3.8 After six quarters of negative growth, the economy 3.3 began a sustained recovery. 2.9 2.7 2.5 2.0 2.0 1.7 1.6 1.3 0.9 0 -0.4 -1.3 -2.0 -2.0 -2.5 -3.8 -3.7 -4.0 -4.2 -5.0 1980 1981 1982 1983 % change year on year Recoveries Compared May 2012
  5. 5. UK GDP - 1930s cycle Recoveries Compared 7.0 In the 1930s, the recession was the most severe setback with negative growth of 6.4% year on year. 5.1 5.3 After six quarters of negative growth, the economy 4.9 experienced a fragile recovery for over a year before 3.5 returning to strong growth in 1933. 2.8 2.5 1.8 0.9 0.4 0.3 0.5 0.1 0.1 0 -1.8 -2.0 -2.3 -3.5 -4.0 -5.3 -5.1 -6.0 -6.4 -7.0 1930 1931 1932 1933 % change year on year Recoveries Compared May 2012
  6. 6. UK GDP Recoveries Compared 7.0 All recessions experience a recovery after 1930s six - seven quarters of negative growth. After 5.3 four quarters of strong recovery, the UK faltered 1980s in 2011 and is now flatlining. 3.5 1990s 1.8 2010s 2010s 0 UK flatlining -1.8 -3.5 -5.3 -7.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Quarters from start % change year on year Recoveries Compared May 2012
  7. 7. UK GDP Recoveries Compared110.0 This is best demonstrated by indexing the recession 1930s and recoveries to 100. Strong recoveries ensued in 1930, 1980 and 1990. 1980s105.0 The UK is flatlining and output is still some 4% of the 2008 peak. 1990s 2010s100.0 It is difficult to identify the stimulus to recovery in the current year. 95.0 1930:1 = 100 1980:1 = 100 1990:2 = 100 2008:1 = 100 90.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Quarters from start Index = 100 Recoveries Compared May 2012
  8. 8. UK GDP - 2008 - 2012 Recoveries Compared 3.5 VAT hike March Budget 1.8 0 -1.8 -3.5 -5.3 -7.0 2008 2009 2010 2011 2012 % change year on year Recoveries Compared May 2012
  9. 9. UK GDP - 2008 - 2012 Recoveries Compared 1980 1990 2008 1980 1990 2008 1980 1990 2008 1980 1990 2008 % change year on year Recoveries Compared May 2012
  10. 10. UK GDP - 2008 - 2012 Recoveries Compared Investment Domestic Demand Investment Consumer Expenditure % change year on year Recoveries Compared May 2012
  11. 11. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday April 28th 2012 Special Feature - UK Recoveries compared In this special presentation we compare the recessions and recoveries of 1930, 1980, 1990 to the current recession and recovery. The recession dating from 2008 is steeper than the recessions in 1990 1980 and as steep as the slow down in the 1930s. The current recovery has faltered, the UK is flatlining and output is still some 4% of the 2008 peak. It is difficult to identify the stimulus to recovery in the current year. Government spending is restricted, household spending is constrained. Investment will await the growth in domestic demand. John Ashcroft is Chief Executive An economic strategy based on depreciation of sterling, net export growth, of pro.manchester, a director of manufacturing resurgence and investment is fundamentally flawed. Marketing Manchester, a member The economy will continue to flatline and flounder. of the Greater Manchester Chamber of Commerce, the AGMA Business Leadership Council and a visiting professor atDon’t miss MMU Business Schoolthe weekly specialising in Macro Economics and Corporate Strategy. e-mail London School of Economics London Business School with a Join me - John Ashcroft - on LinkedIn today, follow @jkaonline PhD in macro economics from MMU.

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