When Did The Great Recession Really End?

The Great Recession is over. In fact, it probably came to an end last year - possibly even before that.

Now, I'll admit that the above isn't yet borne out by the official, or even unofficial, numbers.

According to the Office for National Statistics (ONS), by the end of the first quarter of this year UK gross domestic product (GDP) was still a few fractions of a percentage short of where it was at the start of the crisis in 2008.

As a result, most independent economists think we will almost certainly regain the pre-crisis peak this quarter - in other words, round about now.

So on this basis it's fair to say that in practical terms we are probably there or thereabouts already.

UK gross domestic product and non-oil output since the 2008 first quarter

In fact, if one looks at economic growth excluding the oil sector (itself a volatile element of GDP usually unrelated to broader macroeconomic trends), the pre-crisis peak was already regained last quarter.

But these early estimates of GDP are really only a rough approximation of how much income the economy is generating.

As fresh evidence comes to light in future months and years, the ONS will revise these early estimates.

And in most downturns the subsequent revisions have been upwards rather than downwards, often quite considerably.

The upshot is that it seems likely - extremely likely - that the ONS has overstated the scale of the economic downturn that happened in previous years.

So when the story of the 2008 recession is told a decade from now, the numbers will probably show that it was shorter and shallower than the initial terrifying numbers suggested.

Consider the 1990s recession. The initial ONS numbers suggested it involved a total 4% fall in national income, and that it took 15 quarters for the UK to regain its previous size.

Years later the ONS revised the picture, such that the downturn was about 2% deep, and lasted only 10 quarters.

1990 recession original vs ultimate estimates

The 1990 recession and the original vs ultimate official estimates

The fact that in recent years a whole range of unofficial indicators - consumer confidence, employment, activity as shown by purchasing managers indices - have been suggesting growth has been far stronger than the official data suggests that the same pattern is at play this time around as well.

Official GDP simply seems to be a lot lower than most other yardsticks of growth would suggest.

Now, none of this changes the fact that in terms of sheer severity the recent recession and depression - the National Institute classifies a "depression" as the period for which a country's output is below the pre-crisis peak - is the worst in modern history.

It has been a whopping 25 quarters - more than six years - since the recession began.

The previous record for longest slump was the recession which began in 1979 - where it took four years for the economy to regain its previous size. It would take an upwards revision of almost unprecedented scale to make this current downturn look better than that.

So while we will have to wait a little bit longer until the fat lady sings and the ONS declares the depression that began in 2008 to be at an official end, the likelihood is that that moment came quite a while ago.