Revised GDP growth figures, released earlier today, put reduced
quarter-on-quarter GDP growth to zero, from a previous 0.2%, taking the year-on-year growth rate down to 1.4%.

The problem I have is that those figures use the Government’s preferred method of calculation, applying their GDP Expenditure Deflator. A deflator which is substantially less than CPI, let alone RPI inflation. It all has a vibe very similar to the non-core CPI figure, i.e. that it is an inflation figure with most the inflationary things taken out.

If you apply RPI inflation to the GDP figure you get a different picture.

RPI-adjusted (RPIa) GDP contracted 0.53% compared to the same period last year. The biggest year-on-year drop since Q1 1991.

The quarter-on-quarter figures are even worse. A contraction in RPIa GDP of 1.56%, the largest since Q2 1981. This is the biggest quarterly drop in 27 years.

But here’s the kicker. Both those 1991 and 1981 figures were when coming out the other side of their respective recessions. That means there is more down to come before the up begins.

That gives at least 4 to 6 percentage points of contraction in RPIa GDP still to come, and I mean at least. Which is all in line with what I wrote in Recession in 2008 a Certainty, back in October last year.

As has been observed before, the RPIa GDP growth chart tends to lead the Government’s version of the GDP growth rate in either direction.

Something to keep in mind whilst waiting for opportunities to present themselves.