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GDP up 0.8%: Hurrah - the UK economy is out of depression

Official figures for the second quarter of this year show UK GDP rose 0.8%, putting output back above where it was when things went wrong in 2008. Phew.

by Emma Haslett
Last Updated: 12 Aug 2014

Caloo, calay. Figures published by the Office for National Statistics this morning confirmed what we all kind of knew anyway: that British economic output has returned to where it was before everything went pear-shaped in 2008. In official terms, we're out of depression. That's worth a couple of party poppers over your morning coffee...

GDP increased 0.8% between April and June, which makes output 0.2 percentage points higher than it was in the first quarter of 2008. If you compare it with the second quarter of last year, growth was 3.1%, meaning it's growing at its fastest since the end of 2007. Lovely.


Source: ONS

Growth was mainly driven by the services sector, whose output expanded 1%, and by production, which increased 0.4%. Output in construction, on the other hand, fell by 0.5% - which will go down like a house on fire, literally, with those struggling first-time buyers if that increases pressure on house prices. Agriculture also dropped 0.2%, while manufacturing just clung to growth, edging up a mere 0.2%

Still - the increase is undeniably good news: the UK will be the fastest-growing advanced economy in the world this year, according to a prediction by the IMF.

But the problem is that although economic indicators like GDP suggest we're doing well, individuals haven't experienced the same renaissance. With inflation still outstripping wage growth, living costs are uncomfortably high. The Institute for Fiscal Studies reckons mean income is 8.5% lower than it was at its peak.

Which makes the prospect of an interest rate rise - now looming larger than ever - even scarier. According to research published by the Resolution Foundation yesterday, if rates rise to 3% by 2018, 1.1 million households will be plunged into 'debt peril'. That's one of the worst perils...

Still: it could turn out the UK came out of its depression ages ago anyway. Later this year, the ONS will change the way it calculates GDP, which is likely to show that the depth of the economy's malaise wasn't actually quite as bad as we all thought. In turn, that means the economy almost definitely surpassed its pre-recession peak ages ago.

Prozac for the economy, basically. That's one way of keeping people happy...

Tags:
Economy

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