UK downturn follows the 1930/34 path

Recessions Nov09.jpgPoliticians and analysts often focus on selling dreams. Otherwise, we might not be tempted to buy their promises of better times ahead.

But those running businesses have to remain realistic. BASF’s CEO, Jurgen Hambrecht, did exactly that in his comments on the outlook. And the above chart, from the UK’s National Institute of Economic and Social Research, provides a visual example of the current economic position.

The black line shows the change in UK GDP during the 1930/34 recession. And the thick red line shows how uncomfortably close we are to following its path in the current downturn. Only the 1979/83 recession (green line) comes close to matching it in recent times.

Of course, some countries are currently seeing better economic performance than the UK. But it is still the world’s 6th largest economy, and accounts for 3% of global GDP. As such, it is not a bad benchmark.

The blog does expect GDP to begin to recover in most major economies next year. But the chart is a good reminder that it may take some years for many countries to regain the 2007 peak in terms of actual size of GDP.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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