Comparative Performance of the UK Economy

There was no recession after Brexit. But a slowdown looks like it’s here now…

Figure 1: Log real GDP for France (blue), UK (bold red), Germany (green), US (bold blackteal), and euro area (tealbold black), all normalized to 2016Q2. Source: OECD, BEA, author’s calculations.

Notice that the UK has continued to grow (except with an essential stall in 2018Q1), but output has lagged other major economies. (Another depiction, comparing to G7 countries, is provided by Laurent Ferrara.)

UK GDP growth has lagged its neighbors, even with a depreciated currency. Note however that the Baker, Bloom and Davis index of economic policy uncertainty remains elevated relative to the pre-Brexit average.

Figure 2: Graph 1, Quarter on quarter SAAR growth rate of real UK GDP; Graph 2, Log real trade weighted UK pound, 2010=0; UK Economic Policy Uncertainty index. Horizontal red line is pre-Brexit average. Source: OECD, BIS, Baker, Bloom and Davis, and author’s calculations.

An interesting question is how much of the slowdown is the negative shock of diminished prospects (higher input costs, shrunken export markets, exit of financial services), and how much due to higher economic uncertainty. A review of the macro impact of uncertainty is contained in Ferrara, Lhuissier, Trippier (2017).

What about longer term prospects? Relative to baseline, most estimates are negative, as noted in the (leaked) Cross Whitehall briefing’s preliminary estimates.

All something to consider as the US contemplates exiting from NAFTA, i.e., Nexit…

28 thoughts on “Comparative Performance of the UK Economy

  1. Moses Herzog

    As one who loves FREE research papers it might be easy to guess I LOVE and get a huge kick out of leaked documents. I remember there were a few during the Euro mess and Greek negotiations (Some leaked from the Troika that they made poor attempts to blame on Greek financial ministers). We’re told (Britain, USA, etc) that we live in a democracy. What kind of democracy is it when tons of these similar type documents are kept secret?? I don’t think these fall under “national security” category—not that British parliamentarians wouldn’t be any less likely to SELL them to the public as “sensitive to national security” if they are as dumb as your average US Senator. But let’s hope for Britain’s sake their lawmakers aren’t as demonstratively dumb as ours are. Even I’m not sadistic enough to wish that on any nation

  2. Ed Hanson


    My computer shows no red line in Fig. 2 UK EPU. Also which EPU? daily, 7 day lag monthly, 3 month lag?


    1. Menzie Chinn Post author

      Ed Hanson: Red line there now. At the monthly frequency of data, the only downloadable series is the news-only series, link here (i.e., I did not transform this series, it is direct from BBD).

  3. 2slugbaits

    Menzie It looks like the label colors for the US and Euro area are reversed in Figure 1. The note says the line for the US is black, but the label is teal. And vice versa with the Euro area.

  4. 2slugbaits

    Comrade PeakTrader Just wanted to extend a Happy May Day wish to you and your fellow comrades in St. Petersburg. Did the kommissars at the Internet Research Agency give you the day off?

    1. pgl

      It seems it is a Bank Holiday in London. Maybe with no one going to work – the Putin spies will have to wait until tomorrow to poison their next victim.

    2. Moses Herzog

      This is the big day “PeakIgnorance” and all his friends on the state troll team go sight seeing at famous historical sites where iconic labor struggles occurred. If secret audio had been made, we can imagine it would go something like this:

      Comrade PeakIgnorance: “Look!!! Look Comrade Soldatov!!!! This is Ritz-Carlton Hotel where Trump make the famous PPmattress!!! You think I can touch it??”

      Comrade Soldatov: “Hey, Peakybro, You wanna go to ‘Night Flight’ bar on Tverskaya Street and vee vill re-enact the famous Trump PPmattress incident?!?!?!?! You have to play part of PPgirl this year, remember comrade Peakybro, you always play PPgirl on even numbered years”

    1. pgl

      Economic issues since 2016? Try since the end of 2007. Real GDP grew by a mere 10.9% over the entire decade:

      On a per annum basis, we are talking about barely over 1% per year. Now the Bank of England did its part to stimulate aggregate demand but Cameron’s fiscal austerity has been horrific.

      OK – our right wing guests here applaud fiscal austerity but they are not living in the real world.

    2. pgl

      “Yet another proposal known as “New California” seeks to carve out rural counties into the 51st state and is critical of the state’s sanctuary policies.”

      I bet the citizens of San Francisco and Los Angeles would love it if the rural counties stayed with Trump’s “America” as they went CalExit!

      1. dilbert dogbert

        Rural Kali wants two senators who can bring home the bacon. Two senators, rethuglican, who will vote to build the wall to keep out the Messicans who they depend on to harvest their crops. From the 5 state map I have seen the rural states will have an almost negative state gross product and depend on retirees social security checks to keep somewhat afloat.

        1. noneconomist

          Retirees and government jobs, dd. The small counties of NE California are hotbeds of right wing secessionists. They’re also among the poorest—income wise—in the state. The exception is Lassen County where 60% of those employed are government employees.

    3. Menzie Chinn Post author

      Bruce Hall: IMF disagrees. Just released World Economic Outlook suggests modest acceleration to 1.6% in 2018 (q4/q4) and in 2019. Hardly a boom.

  5. Not Trampis

    Simon Wren-Lewis’s Mainly Macro is another must read blog IMHO. I have regularly highlighted some of his articles on my modest blog ( Winston Churchill would say a modest blog with much to be modest about.)
    My view is that Keynes in 1936 was right. Austerity is correct when the economy is going well ( such as the USA or Australia is doing now). It is terrible when it is not. It is pertinent to note that every country that I know which tried it after the GFC experienced not a recession but a depression. The IMF has published plenty of research showing large fiscal multipliers involved in this, indeed larger than they realised at the time hence their mea culpa on this subject..

    The UK IMHO only tried austerity lite and hence got the weakest recovery in in at least a century. We should also note the UK Government forsook their austerity lite policy to fiscal stimulation 2 years out from the election.

  6. Not Trampis

    Can I just add can the name calling desist.

    It is juvenile. One of the reason I enjoyed this blog was the comments. not so at present. It is very trumpian. If you wish to imitate some-one imitate MLK. please

    1. CoRev

      NotTrampis, “name calling … . It is very trumpian. ” Actually it is very “liberal”. If you remember it started with pgl and Moses, and is human nature to return fire.

      1. Not Trampis

        I called it Trumpian because he has made incivility a byword. No previous President has done that.

        I do not want it to be at this blog.

        On this blog you could well be right about who started it.

        I do not really care. I would like to to go.

        If someone says something stupid merely point it out. Sluggsy was very good at it and I wish he went back to his old ways and I do think it does not shows ProGrowth Liberal in a good light. When he writes over at Econospeak he is consistently good.

        When people reply they ignore your important point and concentrate on the name calling.

        At the very least humour an oldish man

      2. Moses Herzog

        @ CoRev
        No one respects women more than Trump. Believe me!!!! Trump respects women more than anyone. In fact, I feel certain Trump respects CoRev’s Mom at a level that equates on the same level as he respects all the women he discusses in this first link. It is not “Trumpian” to use name-calling or insult women. Believe me!!!!

        But Trump’s actions towards women really speak louder than his verbal insults to women’s dignity

        His daughter Ivanka loves her Mom Ivana very much though. Ivanka knows how her father treated her mother, and still fawns over her Dad, and that’s not for superficial reasons at all.

        Now, one might ask, reading the NYT Exit poll numbers for 2016, “Why do so many Republican women like a man who talks about females in general like they are good for one single function and then become trash to be thrown to the curb??” I don’t know why so many rural white women like a man who continually insults them, you’d have to ask them.

        But we know that crude talk really offends Republicans. We don’t know if the people in this video below will recover and are all obviously suffering from PTSD after all of Trump’s remarks towards blacks and women:

        We know Sarah Huckabee’s father has taught her many many important values, that she will stand-up everyday and support Trump. Sarah Huckabee really knows how to reinforce the treatment white women in America expect to receive from men. And I think ALL conservative, traditional, “family values” Republicans must be grateful Huckabee reinforces this. Her father Mike Huckabee must be bursting with pride everyday that she defends that type of man in society.

    2. Moses Herzog

      “Name-calling” as you put it, is not the disease. Name-calling is the symptom or side-effect of the disease. We need the George Carlins of the world to “call a spade a spade”. Whenever Republicans see something not to their liking, they push the issue to the nth degree. Republicans make sure to put lime on the dead body for quick decomposition, after they metaphorically beat it to death. When Democrats see something they see as an abuse of power, corruption, intellectually vacuous, that take on the voice of Truman Capote saying “Oh!!! Let’s not get into name-calling. Let’s not fight!! Let’s be civilized. Oh, my blood pressure can’t handle this.” Democrats that get angry are emasculated and told we are “snowflakes” while Scott Pruitt flies executive class because he’s afraid he might get the cooties from Grandma Jones and Pruitt needs a $43,000 sound-proof phone booth in his office so he doesn’t feel “bullied” by people he plans on firing in the next 5 minutes for criticizing his choice of neck ties. Republicans have an entire channel (FOX) that licks the toes of a narcissistic megalomaniac (if that is a redundant description). The same megalomaniac they love claiming as theirs if they think it will help them in their primary election campaign run and then turn around on a dime and say “He’s not really a Republican”. They want their cake and eat it too.

      But you Not Trampis, want Democrats to hold our pinky out while we drink our tea?? I am sorry dear gentle, merciful, sensitive-hearted, humane Australian sir, sorry you dear gentle soul. If when I see a large percentage of Americans acting exactly like the satire cartoon below, I will “immaturely and sophomorically” call them all the damned names that I see as exactly befitting to them.

    3. baffling

      not trampis, in a perfect world i would agree with you. but if you want the name calling to stop, you need to step up to the plate and call out the bs that gets parroted on this site by a few trolls. you cannot take the position of moral high ground, while you let some on this site continue to promote dishonest propaganda with no consequence. it is irresponsible.

      1. CoRev

        Baffled, I’m curious. Why is it many liberals call alternative opinions and interpretations “BS”, “dishonest” and “propaganda”? Why is it that many liberals believe their’s is the only truth? Moreover, why do many liberals use name calling such as “trolls” when confronted by these opposing opinions and interpretations?

        Why did you, while responding to a call for “name calling” to stop, resort to name calling? Do you understand the irony of your response?

        1. baffling

          corev, i respect differing opinions. but i have an issue when trolls such as yourself (and others on this site) try to misrepresent their opinions as facts. or worse, misrepresent falsehoods as facts. steven and i disagree, but i have no need to belittle him because he does not try to misrepresent his position as facts.

          and there is no irony. not trampis has asked to give a pass to those who spew propaganda as fact. that is not appropriate. and if you don’t want to be called names, corev, then you can also desist from the propaganda and stick to the facts.

          1. CoRev

            Baffled, “…i respect differing opinions.” No such evidence on this blog, when you call differing opinions propaganda. Then you fell back to your comfort zone with another name calling session. The irony is rampant, propaganda v facts, when you are the arbiter of the truth of each.

            I’ll repeat my question: “Why is it that many liberals believe their’s is the only truth? “

          2. baffling

            that is a question many flat earthers use to try and legitimize their faulty positions.

            “I’ll repeat my question: “Why is it that many liberals believe their’s is the only truth? “”
            liberals do not permit the use of “alternative facts”. idiot.

        2. 2slugbaits

          Why is it that many liberals believe their’s is the only truth?

          So you’re saying that there are alternative truths???

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