UK Economic Round Up: June 2014

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A short presentation looking at key economic indicators in the UK economy.

Covers:

UK GDP: the level and the % below pre downturn level
Compares how GDP recovered in past downturns to how it is recovering from the most recent one.
'Lost Output'
Output from the 3 main sectors of the economy: services, production and construction.

The Labour Market:
Employment
Hours worked
Wages and Prices

Public Sector Debt
House Prices


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Published in: Economy & Finance, Business
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UK Economic Round Up: June 2014

  1. 1. UK ECONOMIC ROUND UP JUNE 2014 These slides reflect the opinions of the author and not the official position of the ONS
  2. 2. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Source: ONS UK GDP
  3. 3. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Not yet back to pre-downturn level: Source: ONS UK GDP
  4. 4. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Not yet back to pre-downturn level: Source: ONS UK GDP – Comparisons to Past Downturns
  5. 5. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Downturn beginning 1979 Q2 Not yet back to pre-downturn level: Source: ONS UK GDP – Comparisons to Past Downturns
  6. 6. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Downturn beginning 1979 Q2 Downturn beginning 1973 Q2 Not yet back to pre-downturn level: Source: ONS UK GDP – Comparisons to Past Downturns
  7. 7. -8 -7 -6 -5 -4 -3 -2 -1 0 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % away from pre-downturn level of output Downturn beginning 2008 Q1 Downturn beginning 1979 Q2 Downturn beginning 1973 Q2 Downturn beginning 1990 Q2 Not yet back to pre-downturn level: Source: ONS UK GDP – Comparisons to Past Downturns
  8. 8. 300 310 320 330 340 350 360 370 380 390 400 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 In Q1 2008 GDP for the UK was estimated at over £392 billion In Q3 2009 GDP for the UK was estimated at £365 billion Billions (£) Source: ONS UK GDP Level
  9. 9. % away from pre-downturn level of output Growth with no downturn Growth after downturn is faster than pre-downturn Time Post Recession Possibilities: Scenario 1
  10. 10. % away from pre-downturn level of output Growth after downturn is the same as pre-downturn Growth with no downturn Time Post Recession Possibilities: Scenario 2
  11. 11. % away from pre-downturn level of output Growth after downturn is the same as pre-downturn Growth with no downturn Time Why is this bad? Post Recession Possibilities: Scenario 2
  12. 12. % away from pre-downturn level of output Growth after downturn is the same as pre-downturn Growth with no downturn Why is this bad? In this scenario the economy will not recover “lost output”. The output that would have occurred if the economy had stayed on trend. Time Post Recession Possibilities: Scenario 2
  13. 13. % away from pre-downturn level of output Growth after downturn is slower than pre-downturn Growth with no downturn Time Post Recession Possibilities: Scenario 2
  14. 14. % away from pre-downturn level of output Growth after downturn is slower than pre-downturn Growth with no downturn This scenario is even worse! The amount of “lost output” will be even bigger! Time Post Recession Possibilities: Scenario 2
  15. 15. • Recent OECD forecasts suggest that the UK’s trend rate of growth will return to it’s pre-downturn level • Thus suggesting the UK recovery may look like Scenario 2: Time % away from pre-downturn level of output OECD Forecasts
  16. 16. • Services • Construction • Production • Agriculture OECD Forecasts
  17. 17. Index, March 2008 = 100 Output in the service sector has recovered and is now above it’s pre-downturn level: Source: ONS 75 80 85 90 95 100 105 110 115 120 125 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Index of Services
  18. 18. 84 88 92 96 100 104 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Index, March 2008 = 100 Output in the production sector has not recovered to it’s pre-downturn level: Source: ONS Index of Production
  19. 19. 80 85 90 95 100 105 110 115 120 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 Index, March 2008 = 100 Output in the construction sector has not recovered to it’s pre-downturn level: Source: ONS Index of Construction
  20. 20. • Employment • Wages • Hours Worked The Labour Market
  21. 21. 70.0 70.5 71.0 71.5 72.0 72.5 73.0 73.5 74.0 2002Q1 Q3 2003Q1 Q3 2004Q1 Q3 2005Q1 Q3 2006Q1 Q3 2007Q1 Q3 2008Q1 Q3 2009Q1 Q3 2010Q1 Q3 2011Q1 Q3 2012Q1 Q3 2013Q1 Q3 2014Q1 Per cent Not yet back to pre-downturn level: Source: ONS Employment Rate (16 – 64 year olds)
  22. 22. 880 890 900 910 920 930 940 950 960 970 980 2002Q1 Q3 2003Q1 Q3 2004Q1 Q3 2005Q1 Q3 2006Q1 Q3 2007Q1 Q3 2008Q1 Q3 2009Q1 Q3 2010Q1 Q3 2011Q1 Q3 2012Q1 Q3 2013Q1 Q3 2014Q1 Millions of actual hours worked The employment rate is still below it’s pre-downturn level but actual hours worked has surpassed it’s pre-downturn level. What could explain this? Source: ONS Hours Worked
  23. 23. 880 890 900 910 920 930 940 950 960 970 980 2002Q1 Q3 2003Q1 Q3 2004Q1 Q3 2005Q1 Q3 2006Q1 Q3 2007Q1 Q3 2008Q1 Q3 2009Q1 Q3 2010Q1 Q3 2011Q1 Q3 2012Q1 Q3 2013Q1 Q3 2014Q1 Millions of actual hours worked The employment rate is still below it’s pre-downturn level but actual hours worked has surpassed it’s pre-downturn level. What could explain this? Population increase! Source: ONS Hours Worked
  24. 24. 300 350 400 450 500 550 600 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 Source: ONS Average Weekly Wages
  25. 25. 300 350 400 450 500 550 600 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 Growth in average weekly wages has been slower since the downturn Source: ONS Average Weekly Wages
  26. 26. -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Jan- Mar 2009 Jan- Mar 2010 Jan- Mar 2011 Jan- Mar 2012 Jan- Mar 2013 Jan- Mar 2014 Annual Growth Rates in Earnings and Consumer Prices Earnings ex. bonuses Earnings inc. bonuses Consumer Prices Index Source: ONS Wages and Prices
  27. 27. -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Jan- Mar 2009 Jan- Mar 2010 Jan- Mar 2011 Jan- Mar 2012 Jan- Mar 2013 Jan- Mar 2014 Annual Growth Rates in Earnings and Consumer Prices Earnings ex. bonuses Earnings inc. bonuses Consumer Prices Index Growth in earnings inc. bonuses has risen above growth in consumer prices for the first time since 2010. However, growth in earnings ex. bonuses is still below. Source: ONS Wages and Prices
  28. 28. Public Sector Debt and House Prices
  29. 29. 0 20 40 60 80 100 120 140 160 180 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Ex. interventions Inc. interventions 132% Note: Interventions mainly refer to the nationalisation of certain commercial banks 76% Source: ONS % of GDP Public Sector Debt
  30. 30. 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Increase in House Prices over a decade RPI (ex. housing) If you bought your house in 1970 and sold it in 1980 on average you would have seen the price of your house quadruple But on average the prices of other products would have only been around 2.5 times higher Source: ONS Wealth effect? % increase House Prices
  31. 31. 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Increase in House Prices over a decade RPI (ex. housing) If you bought your house in 1970 and sold it in 1980 on average you would have seen the price of your house quadruple But on average the prices of other products would have only been around 2.5 times higher Source: ONS Wealth effect? % increase But, on average the prices of other products would have risen by a similar amount: 43% If you bought your house in 2003 and sold it in 2013 on average you would have seen the price of your house rise by 45% House Prices
  32. 32. • You may also like: • http://www.ons.gov.uk/ons/rel/elmr/gdp-and- the-labour-market/q1-2014--may-gdp- update/sty-gdp-g7-economies.html • http://www.ons.gov.uk/ons/rel/elmr/economi c-review/june-2014/art-june-er.html If you liked this presentation . . .

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