Do you need any more proof that looking for “technical recessions” is useless? This is the headline I read today:
How the Queen saved the UK from a recession—for now
That’s how Quartz titled an article about whether the UK will descend into recession.
What happened? The UK celebrated the Platinum jubilee of the Queen—70 years on the throne. So that everyone can participate, the government moved one bank holiday—and declared a new one-time bank holiday*. That means, there was at least officially one day less work happening.
Why does a bank holiday matter for a recession?
There are two ways to figure out if you’re in a recession, and the ~silly~ simple way is to say “two quarters in a row where GDP goes down”. Now, if you send everyone off to party in the street obviously not much work is happening, productivity goes down, and GDP goes down. A small bit maybe but still.
The previous quarter saw slight growth (0.8%). So, the UK is not in a recession yet. It all depends on next quarter: will the economy grow from here on, or decline further? And that’s when that extra bank holiday comes into play.
The extra bank holiday pushed GDP down, so a small bounce-back next quarter is expected. It happened before, for example after the Queen’s golden jubilee in 2002. The UK’s Office for National Statistics reports, emphasis mine:
This extra bank holiday contributed to a fall in monthly GDP of 2.3% on current estimates. GDP then recovered in July as expected after the one-off special event, with a rise of 1.8%.
Next quarter more hours will be worked in comparison (no extra bank holiday) and firms may work extra hard to make up the lost time—so GDP might just rise ever so slightly. And that is enough to avoid a recession—technically.
Does that mean the UK is avoiding a tough economic downturn?
So a recession has been avoided—great news? Nope! The economic outlook hasn’t changed one bit. Inflation is still up there, Ukraine is still a war-zone, supply chains are still a mess.
There are two things to take away from this: no, the Queen did not save the UK from a recession—the UK economy isn’t doing any better for that extra holiday. And defining a recession as “GDP goes down for two quarters” is not helpful.
Okay, done ranting.