CAMBRIDGE – The release of revised GDP data by the United Kingdom’s Office for National Statistics in late June seemed like an occasion for cheer, because growth had not quite been negative for two consecutive quarters in the winter of 2011-12, as previously thought. The point, as it was reported, is that a second UK recession following the global financial crisis in 2008 (a “double dip”) had now been erased from the history books, and that the Conservative government would take some satisfaction from this fact. But it should not.
The right question is not whether there have been double (or triple) dips; the question is whether there has been one big recession all along. As the British know all too well, their economy since the low point of mid-2009 has not yet climbed even halfway out of the post-crisis hole: GDP is still almost 4% below its previous peak. If European countries used similar criteria to those used in the United States for determining economic cycles, the Great Recession in Britain would quite possibly not have been declared over in the first place.
Recent reports that Ireland entered a new recession in early 2013 would also read differently if American criteria were applied. Irish GDP since 2009 has not yet recovered more than half of the ground lost between the peak of late-2007 and the bottom two years later. Following US methods, Ireland would not be judged to have escaped the initial recession. As it is, one mini-recovery after another has been heralded, only to give way to “double dips.”
Similarly, it was recently reported that Finland had entered its third recession since the global financial crisis. But the second one would be better described as a continuation of the first.