1939: Tail Spin – Roy Del Ruth
There is further bad news for the Government, which will note the growing criticism that current actions to stimulate the economy do not appear to be working. The ONS data reveals that the UK economy contracted by 0.7% in the second quarter of 2012. This is of course only an estimate, but means that the main way we measure the growth of the UK economy has shrunk for a third successive quarter. This is obviously unwelcome news. However, once again I would like to remind you of how politicians from all sides and our rather lazy media will report this.
Total seasonally adjusted GDP for the UK has data collected since 1948. Then it stood at £276,458m and last year reached £1,437,909m. A big number I’m sure you will agree. Remember that GDP naturally rises due to inflation (or should do). If I were to reveal that GDP reached its highest point in 2007 before the credit crunch, this may help provide a fuller picture.
We don’t know yet how 2012 will end, but if things remain as they I estimate a figure of £1,428,328, which would be better than 2010 and 2009 but not quite as good as last year £1,437,909. This would represent a decline in GDP by 0.66% against last year. I would remind you, not that you need it, that the crisis in Europe and world economies is probably the most serious in living memory. For the record, the top ten largest actual quarterly falls in GDP were as follows:
1958 Q2 -2.5%
1974 Q1 -2.4%
1979 Q3 -2.3%
2008 Q4 -2.1%
1980 Q2 -1.8%
2008 Q3 -1.8%
1975 Q2 -1.6%
2009 Q1 -1.5%
1975 Q4 -1.2%
The latest figures are the 22nd worst out of a possible 230 recorded. Negative or no growth is recorded in 51 of the 230 quarters. That’s about 22% of occasions. Growth under 1% is recorded in 101 quarters (44% of the time) and growth of 1% or more is recorded on 78 quarters 34% of the time. You may be interested to also know that there has been only one incident of quarterly growth of 2% or more in the last 33 years (since 1979), which was in Q3 of 1987 when 2.4% was recorded.
Whilst the media may talk of this as the worst economic data since the wheel, five successive negative quarterly periods were “achieved” from 1990 Q3- 1991 Q3 and again from 2008 Q2- 2009 Q2. The latest media feeding frenzy that this is news of a third consecutive negative quarter also occurred in 1973 Q3-1974 Q1 and 1980 Q1-Q3, and only just avoided 1974-1975. The uncomfortable truth is that we have not really recovered from the credit crunch, which anyone with a pulse knows. Certainly things are not good economically, but the way information is presented is not exactly helpful. Of course a reality check will not prevent the markets from behaving foolishly, but frankly in the short-term that is pretty much all we expect anyway. The wise proceed with caution.

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