The UK Economic Accounts for the first quarter 2013 were published this morning. The UK media - e.g. here - tended to highlight that revisions had removed the double dip recession in the first quarter of 2012. GDP fell in the second quarter but now appears to have remained flat in the first quarter of 2012 rather than falling.
But to me the real story is that the revisions to the data mean that the recession was worse than previously thought with GDP falling by 7.3% rather than 6.3%. Moreover, in the first quarter UK GDP is now seen to be just under 4% - 3.9% - below its pre-recession peak compared to -2.9% before.
The chart below shows the track in recession and recovery of GDP at basic prices and at factor cost.
GDP at factor cost = GDP at market prices - indirect taxes + subsidies, whereas GDP at basic prices excludes taxes less subsidies on products (taxes on products include VAT and excise duties) but includes taxes and subsidies on production other than taxes and subsidies on products.
Any variation between the two measures will reflect changes in taxes and subsidies on production.
With these net taxes removed, and therefore using the measure of GDP at factor cost, we see from the chart that the scale of the recession becomes slightly worse at -7.6% below peak. And the current shortfall below the pre-recession peak of -4.8% is much worse than the position measured in basic prices of -3.9%.
The Chancellor may believe correctly that he has won the argument on austerity with the voters but the data show how specious that claim is.
And a final Scottish thought.
If Scotland's data remain unrevised for the period then the scale of the recession and the current position in relation to the pre-recession peak is much better here: a drop of GDP in recession of 5.6% compared to 7.3% in the UK and 2.3% below pre recession peak here compared to 4.1% in the UK at the end of the fourth quarter 2012.
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