We’ve one of those little bugbears turning up in the reporting of the UK GDP figures. The claim that the economy came to a shuddering stop, that it all ground to a halt. Nonsense – that’s to confuse velocity with acceleration. Travelling along at 70 miles an hour and moving up to 71 mph – or not, as the case may be – is very different from going at 70 and then immediately going to 0 mph. That second is the sort of thing that usually requires the intervention of a brick wall and we’d all notice that rather more than a 1 mph variation, wouldn’t we?
But that is the sort of claim that people are making:
UK economy grinds to a halt as GDP growth falls to five-year low
No, really, just no.
Britain’s economy ground to a halt in the first three months of the year as bad weather piled woes on top of squeezed household finances and a troubled construction industry.
GDP growth plunged to just 0.1pc in the first quarter of this year compared to the last quarter of 2017.
About the actual growth number, yes, bad weather does slow it down. Some economic activity doesn’t take place as a result of half the population being up to their gonads in snow. It’s also rather a transient thing. The long term drivers of growth are technological advance and the associated rises in productivity. Those don’t cease – nor even really stutter – just because Fred can’t get to work for three days. These sorts of weather induced slow downs tend to get made up in subsequent quarters.
Actually, pretty much all such interruptions tend to get made up. Look at growth on the truly long term scale, from say 1500 AD to today and even the Great Depression is just a wibble in the line, the 1930s being a dip below average, the 50s and 60s more than making it up by being above that average.
But to the actual whinge today. The economy simply did not come to a halt. UK GDP is of the order of £1.8 trillion a year – what, you think I’m going to bother looking up today’s figures? – or some £450 billion a quarter. Hmm, well, no, it doesn’t really work like that, we know there’s a distinct fall off between Dec 24th and Jan 2 for example, something we smooth over with our seasonal adjustments. But, still, £450 billion a quarter. And the British economy, in this last quarter, did about that £450 billion. The actual finding from the new figures is that it was pretty much the same as the quarter before it, the same quarter last year perhaps. £450 billion.
Not, absolutely not, the £0 if the economy had come to a halt. We produced about the same as we did in the previous three months, we had about the same income we did and we consumed about the same amount. That is, we continued to travel along at about 70 mph, velocity remained constant, it’s acceleration which didn’t happen very much. And we most certainly didn’t decelerate to 0 mph either.
Do note that such deceleration has actually happened, Germany in summer 1945 being a reasonable example. And believe me, we’d note the difference between near no growth in the economy and not having an economy.