Thursday, 11 June 2009

Out of recession?

In the last few days a number of analysts have suggested we may be 'on the up', Government Ministers have been wheeling out the cliches 'turning the corner', 'green shoots emerging'.

Today, LEAP was asked to comment on reports by the National Instutute of Economic and Social Research (NIESR) which states that the recession is over. They estimate that GDP has increased by 0.1% and 0.2% in the last two months. This is pretty minimal and within any sensible margin of error.

Others have pointed to UK manufacturing production having increased by 0.2% in each of the last two months. But looking at the data in absolute terms gives a different perspective. Output in February, the current trough of the credit crunch, was 13.9% below the 2008 peak. After two months of 'recovery', production is 13.5% below the peak.

Data from the rest of the world, especially the US, Germany and Japan continues to be negative - and the global recession will not recede until the major economies see an upturn. To look at the UK in isolation, without considering our major trading partners, is naive. Even if official figures (out next month) confirm a stabilisation, or even a moderate upturn, there is no inevitability that the subsequent quarter (summer to autumn) won't see a retrenchment.

However, this all rather misses the point for us as socialists. As LEAP said in our Red Papers April 2009 report:

"The effects of a recession on working people always lag behind the economic data of GDP growth. When the UK economy was entering the 'Lawson boom' of the mid-eighties, unemployment was reaching its peak.

"This highlights how we measure recession is skewed towards the dominant interests of capital. Why don't we start defining 'recession' as when poverty levels are over 10% or unemployment (ILO measure) over 1 million."


In short, just because the corporate profitability of UK plc might be being restored, it does not mean we will see an end to rising unemployment, rising repossessions and declining pay awards anytime soon.

Our comments appear in greater depth in the Morning Star.

Update: Ann Pettifor argues similarly on Comment is Free today that the recession is far from over.

Update 2: The CBI has today (15/06) also warned "Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots'"

Update 3: Richard Murphy says on his blog today (16/06) "I don’t spy green shoots. I just see markets making merry on tax payers money which they are using for speculation, not lending. Which is why firmer control of banks is necessary". Quite.