Just how bad is the state of the UK’s economy? Another clue will come in Tuesday’s GDP figures – the first estimate of third quarter growth.
Shadow Chancellor, Ed Balls, leads the “there’s no growth” camp with his oft-quoted line: “Our economy has flat-lined now for nine months. Slower growth in Britain than any other G7 country except Japan.” It’s certainly true that the latest estimate of the UK’s output in Q2 sees it at the same level achieved in Q3 of last year – the quarter on quarter growth has been non-existent. 
The chart below shows the annual growth rates for the world’s six leading western countries, up to the second quarter. We prefer annual growth rates as it shows trends better than quarterly figures. It shows two outliers – Japan is performing poorly and Germany is performing (relatively) well. France, Italy, the UK and US are in the “pack”. The UK might be low down among the four, but there is nothing in the trends for Italy and the US that make their immediate outlooks any rosier. It looks as if these countries are all facing similar troubles.
GDP volumes, annual % change, EU from Timetric
Lets also remember that these numbers are only so accurate – of course, a +0.1 or -0.1 makes for a very different headline but means little in the real world. Earlier in October, the UK’s growth figures were dramatically revised, rewriting the story of the recession (this is City AM’s take on that change). There is every chance that the picture as currently portrayed for 2011 for all the countries will look different in a year’s time.
Rather than focusing too much on the change in one quarter’s GDP figure, it might be more illuminating to look at the levels of consumption and manufacturing output. As the chart below shows, both consumption and production have recovered from the low points of the recession but are no where near returning to the levels seen in 2007 and into 2008. Manufacturing output has risen in each of the last seven quarters and household consumption has fallen in the last four.