Britain's GDP Continues To Fall
Great Britain's Office for National Statistics announced (opens .pdf) today that the nation's GDP decreased by 0.4% in the third quarter. This marks the sixth straight quarter of contraction. That's the longest period of decline since the Office began keeping records in 1955. Here's what Britain's GDP picture looks like, from the official release:
As you can see, production looks very, very ugly, but services have declined steadily as well. In fact, the only industry that had a positive contribution to growth was government, as this chart shows:
This data comes as a big surprise to economists. In fact, the Times Online notes that some economists don't believe it. Here are two it quotes:
Hetal Mehta., senior economic advisor to the Ernst & Young ITEM Club, said: "It appears that the ONS has made some fairly conservative assumptions about September output data, and once more data is available, there is a strong possibility that the third quarter figures will be revised up, possibly to -0.1 per cent or 0 per cent."
Ben Broadbent, an economist at Goldman Sachs, said: "At a time when all other indicators are consistent with much stronger growth, we expect today's data to be revised significantly higher in time."
But for now, that's the number we've got. How does Britain's GDP over the past few years compare to what the U.S. has seen? I went ahead and indexed both nations' GDP trends from the same start point in Q1 2006, using the U.S. Bureau of Economic Analysis data:
You might notice that the U.S. has no point for the third quarter. That number is set to be released next Thursday, so we'll know how the trend looks at that time. It's largely expected to be positive, with many estimates in the ballpark of 3%.
What is kind of interesting to note, however, is that although the U.S. has steeper climbs and falls, its general direction looks very similar to that seen in Britain's trend. The only significant deviation is that the U.S. also had hefty uptick in Q2-2008, but that was mostly due to President Bush's stimulus rebate payments. This leads me to wonder whether optimism for the U.S.'s third-quarter number is also incorrect. Of course, the trend could easily diverge. If the U.S.'s stimulus efforts were more effective than Britain's, better third-quarter results could follow, just like in the second quarter of 2008.