Week 43, 2015: International Post-Recession Recovery

Summary: Preliminary figures released by the Office for National Statistics yesterday suggested that UK GDP growth in the third quarter of the year was 0.5% - lower than the previous quarter's growth rate of 0.7%, and the consensus forecast of 0.6%. This is still a reasonable single quarter figure, and continues the steady growth the UK has experienced since 2013.

What does the chart show? The chart shows an index of Gross Domestic Product (GDP) for each of the G7 economies. The index is calculated using chained volume estimates (designed to counter inflation) in the relevant local currency, and adjusted so that its value at the pre-recessionary peak (which differs across countries, but for our purposes is taken to mean the first quarter of 2008) is equal to 100. This means that any value above 100 represents a higher real level of national output than before the recession hit, and vice versa.

Why is the chart interesting? A lot has changed since we last updated this chart in April 2014. Canada remains the G7 leader in post-recession growth, but has fallen into an official recession in 2015 - its first since 2008/09 - while US growth has remained strong, if a little inconsistent.  Revisions to the French data show that they recovered to their pre-crisis level of output sooner than previously thought, but growth has remained flat since then.  Japan suffered another periodic recession in 2014, pulling them back below 100, but they have since recovered.  Italy remains seriously weak, with little sign of any genuine recovery.

Perhaps the biggest change, though, has been in the profile of the UK.  Major revisions to the original data, as well as structural changes to the way GDP is measured, have made the performance of the UK look much better than in previous charts.  The initial crisis now looks like it was not as bad as in Germany and Italy, and although the UK initially recovered very slowly (and was the 5th of the G7 countries to return to the pre-crisis peak), steady growth has seen the UK overtake France and Germany, relative to their 2008 peaks.  In fact, since 2010, the UK has grown faster than any of the other G7 countries, despite the slowdown in 2011/12.