Knowing and Making

The UK grew at an unexpectedly strong 1.1% rate in the second quarter, according to the ONS. Unexpected to the consensus of economists, that is - some of us are not so surprised. It has seemed clear - anecdotally, but from a wide range of conversations - that the economy has been fairly strong in the last few months - and with unexpectedly low growth in Q1, a rebound was already likely to show up the Q2 figures. This means that over the last year, the economy has grown by 1.6% - including a quarter of negative growth in 2009 Q3. If this quarter's rate is sustained - which it probably won't be - we will have almost 3% growth from October 2009 to September 2010. Even if it falls back to 0.7%, we will still have achieved a 2.5% growth rate. Despite George Osborne's sheepish attempts to take the credit - you can just tell that he knows better - this is a clear vindication of the last government's policies. Or rather, as Chris Dillow hints , it vindicates the last go...

There's no specific point to this picture - feel free to draw your own conclusions. It comes from a neat feature from Google, which I suspect has been around for a while if I'd looked for it earlier. Here's the link if you want to play.

Some news has been creeping in which gives us a picture of the British economy that's gradually becoming clearer. First, from the ONS via David Smith : Business investment for the first quarter of 2010 is estimated to be 6.0 per cent higher than the previous quarter. From the same source, some news on public borrowing: ...in December, the Treasury preducted public sector net borrowing for 2009-10 of £178 billion on the definition it uses. The latest figures from the Office for National Statistics show a downward revision to the outturn, taking it to £156 billion...At one time people were predicting figures as high as £220 billion. Recent growth estimates are decent (though not outstanding) too: Gross Domestic Product (GDP) increased 0.2 per cent in the first quarter of 2010, compared with an increase of 0.4 per cent in the previous quarter. There was a concern prior to the release that growth might be negative, due to heavy snow in January and February. So growth of 0.2%, thou...

Not satisfied with interrupting our gas supplies, Russia has raised the stakes by sending us 10 inches of snow from Siberia in the last 24 hours. Of course these two policies interact nicely - both driving up the price of gas, which will help to offset some of Russia's $1 billion a day of lost revenue from the collapsed oil price. Now you may say that it's not in Russia's power to dump that much snow on the British market - but I would point out that is only true in a model with perfectly flexible exchange rates. Clearly in this weather the exchange rate, along with everything else, is frozen. Walking around London today I think it's clear that there will be a measurable impact on quarterly GDP. Most shops and restaurants are closed, and lots of people didn't go to work today. Naturally some demand will simply be stored up, but some will be lost forever. Given around 60 working days in a quarter, a 20% loss of output on one day translates to about a 0.3% decline in...

An amazing piece of research is published today in VoxEU. Louis Putterman and David N. Weil have discovered that the proportion of a country's ancestry which lived in Europe in 1500 explains 44% of the variation in per-capita GDP in 2000. This is a huge influence and should have a big impact in understanding how countries - and people - achieve economic success. The VoxEU article speaks for itself really, so have a look. Possible areas to follow up: How is the migration distributed through time - for example if most emigration to the US happened in the 1800s, the dominant effect may not be 500 years old but only 150. Today's ethnic classifications express only roughly the ancestry of individuals. How many ancestors do you have who were alive in 1500? The answer is: around a million (assuming 25-year generations and minimal inbreeding!). I don't think the survey purports to account for the fact that these people must have almost certainly come from more than one country. As...