UK Economic Round Up: June 2014

UK ECONOMIC ROUND UPJUNE 2014

These slides reflect the opinions of the author and not the official position of the ONS

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

-8

-7

-6

-5

-4

-3

-2

-1

0% away from pre-downturn level of output

Downturn beginning2008 Q1

Source: ONS

UK GDP


-8

-7

-6

-5

-4

-3

-2

-1



Not yet back to pre-downturn level:

Source: ONS

UK GDP


-8

-7

-6

-5

-4

-3

-2

-1




Source: ONS

UK GDP – Comparisons to Past Downturns


-8

-7

-6

-5

-4

-3

-2

-1





Source: ONS



-8

-7

-6

-5

-4

-3

-2

-1






Source: ONS



-8

-7

-6

-5

-4

-3

-2

-1







Source: ONS


2000

Q1

2000

Q3

2001

Q1

2001

Q3

2002

Q1

2002

Q3

2003

Q1

2003

Q3

2004

Q1

2004

Q3

2005

Q1

2005

Q3

2006

Q1

2006

Q3

2007

Q1

2007

Q3

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

300

310

320

330

340

350

360

370

380

390

400 In Q1 2008 GDP for the UK was estimated at over £392 billion

In Q3 2009 GDP for the UK was estimated at £365 billion

Billions (£)

Source: ONS

UK GDP Level

% away from pre-downturn level of output

Growth with no downturn

Growth after downturn

is faster than pre-downturn

Time

Post Recession Possibilities: Scenario 1



is the same aspre-downturn


Time






Time

Why is this bad?






Why is this bad?

In this scenario the economy will not recover “lost output”. The output that would have occurred if the economy had stayed on trend.

Time




is slower thanpre-downturn


Time




is slower thanpre-downturn


This scenario is even worse!

The amount of “lost output” will be even bigger!

Time


• Recent OECD forecasts suggest that the UK’s trend rate of growth will return to it’s pre-downturn level

• Thus suggesting the UK recovery may look like Scenario 2:

Time


OECD Forecasts

• Services

• Construction

• Production

• Agriculture

OECD Forecasts

Index, March 2008 = 100

Output in the service sector has recovered and is now above it’s pre-downturn level:

Source: ONS 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

75

80

85

90

95

100

105

110

115

120

125

Index of Services

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

201484

88

92

96

100

104 Chart TitleIndex, March 2008 = 100

Output in the production sector has not recovered to it’s pre-downturn level:

Source: ONS

Index of Production

20

20

20

20

20

20

20

20

20

20

20

20

20

80

85

90

95

100

105

110

115

120Index, March 2008 = 100

Output in the construction sector has not recovered to it’s pre-downturn level:

Source: ONS

Index of Construction

• Employment

• Wages

• Hours Worked

The Labour Market

2002Q

1

Q3

2003Q

1

Q3

2004Q

1

Q3

2005Q

1

Q3

2006Q

1

Q3

2007Q

1

Q3

2008Q

1

Q3

2009Q

1

Q3

2010Q

1

Q3

2011Q

1

Q3

2012Q

1

Q3

2013Q

1

Q3

2014Q

1

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0Per cent


Source: ONS

Employment Rate (16 – 64 year olds)

2002Q1

Q3

2003Q1

Q3

2004Q1

Q3

2005Q1

Q3

2006Q1

Q3

2007Q1

Q3

2008Q1

Q3

2009Q1

Q3

2010Q1

Q3

2011Q1

Q3

2012Q1

Q3

2013Q1

Q3

2014Q1880

890

900

910

920

930

940

950

960

970

980

Millions of actual hours worked

The employment rate is still below it’s pre-downturn level but actual hours worked has surpassed it’s pre-downturn level. What could explain this?

Source: ONS

Hours Worked

2002Q1

Q3

2003Q1

Q3

2004Q1

Q3

2005Q1

Q3

2006Q1

Q3

2007Q1

Q3

2008Q1

Q3

2009Q1

Q3

2010Q1

Q3

2011Q1

Q3

2012Q1

Q3

2013Q1

Q3

2014Q1880

890

900

910

920

930

940

950

960

970

980

Millions of actual hours worked

The employment rate is still below it’s pre-downturn level but actual hours worked has surpassed it’s pre-downturn level.What could explain this?Population increase!

Source: ONS

Hours Worked

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014300

350

400

450

500

550

600

Source: ONS

Average Weekly Wages

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014300

350

400

450

500

550

600

Growth in average weekly wages has been slower since the downturn

Source: ONS

Average Weekly Wages

Jan- Mar 2009 Jan- Mar 2010 Jan- Mar 2011 Jan- Mar 2012 Jan- Mar 2013Jan- Mar 2014-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Annual Growth Rates in Earnings and Consumer Prices

Earnings ex.bonuses

Earnings inc.bonuses

Consumer Prices Index

Source: ONS

Wages and Prices

Jan- Mar 2009 Jan- Mar 2010 Jan- Mar 2011 Jan- Mar 2012 Jan- Mar 2013Jan- Mar 2014-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Annual Growth Rates in Earnings and Consumer Prices

Earnings ex.bonuses

Earnings inc.bonuses

Consumer Prices Index

Growth in earnings inc. bonuses has risen above growth in consumer prices for the first time since 2010. However, growth in earnings ex. bonuses is still

below.

Source: ONS

Wages and Prices

Public Sector Debt and House Prices

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

140

20

40

60

80

100

120

140

160

180

Ex. interventions

Inc. interventions

132%

Note: Interventions mainly refer to the nationalisation of certain commercial banks

76%

Source: ONS

% of GDP

Public Sector Debt

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Increase in House Prices

over a decade RPI

(ex. housing)

If you bought your house in 1970

and sold it in 1980 on average you would have seen the price

of your house quadrupleBut on average the prices of other products would have only been around 2.5 times higher

Source: ONS

Wealth effect?% increase

House Prices

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Increase in House Prices

over a decade RPI

(ex. housing)

If you bought your house in 1970

and sold it in 1980 on average you would have seen the price

of your house quadrupleBut on average the prices of other products would have only been around 2.5 times higher

Source: ONS

Wealth effect?% increase

But, on average the prices of other products would have risen by a similar

amount: 43%

If you bought your house in 2003 and sold it in 2013 on average you would have seen the price

of your house rise by 45%

House Prices

• You may also like:

• http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/sty-gdp-g7-economies.html

• http://www.ons.gov.uk/ons/rel/elmr/economic-review/june-2014/art-june-er.html

If you liked this presentation . . .

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q1-2014--may-gdp-update/sty-gdp-g7-economies.html



http://www.ons.gov.uk/ons/rel/elmr/economic-review/june-2014/art-june-er.html

http://www.ons.gov.uk/ons/rel/elmr/economic-review/june-2014/art-june-er.html

UK Economic Round Up: June 2014

Economy & Finance

Transcript of UK Economic Round Up: June 2014