Commentary – GDP
In the UK, indicators of real income and output have tended to grow over the last 50 years at rates generally about 2% per year with occasional booms and busts. Prior to the financial crisis in 2007 there were three notable ‘busts’: in 1974-5 following the oil price shock; in 1980-81 in response to the Thatcher government’s anti-inflation policy; and in 1991 after a burst of inflation.
The ‘bust’ that began in 2007 has been especially severe. The period from 2007-2012 is the only episode in the last 60 years when UK real GDP was below the level it reached 5 years previously.
The performance of UK real GDP per capita has been similar to that of real GDP but in the period from 2007-2014, even worse. By the end of 2014 real GDP per capita was still below the value it achieved in 2007 – the only time in the last 60 years that it was below the level it achieved 7 years previously.