GDP trends – financial services suffer

The UK’s third quarter GDP figures from the ONS were pretty much good news all round – stronger growth than expected and most sectors sharing in that rise. But leaving aside the obsession in the quarter to quarter changes, it is the trend in levels of output since the economy started to slip into recession that are interesting. Interestingly, it is financial services that is suffering most ……….

The chart below shows the levels of output in the UK as a whole (the green line) and in each sector since the summer of 2007. As the green line shows, the economy is growing, albeit painfully slowly. There has been growth every quarter bar one since the trough in Q2 2009. It’s not great but it’s not Greece (or Portugal or Japan).

Overlay from Timetric

(Note the chart runs only to Q2 so does not have today’s numbers on it – but the key point is the trend over the last four years.)

Different sectors have, however, had very different recessions – look at the gap between the lines in 2009. Construction and manufacturing suffered most but, as is often the way, larger falls can leave scope for a larger bounce back.

The two lines worth focusing on are government services (the yellow line) and financial services (the light blue line). Despite all the talk of public sector cuts, the government sector keeps on growing – it is the only sector to be above pre-recession levels. And the sector’s 1.4% growth in the year to Q3 is the third strongest of the ten sectors shown in the ONS release. Meanwhile, it is business and financial services that has shown the least growth (of any of the major sectors shown) from its trough.

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