Along with revised GDP numbers, we now have GDP per head for 2014 as a whole. (I have used estimates for the fourth quarter up until now.) Growth in 2014 was 2.17%. That is certainly an improvement on previous years: 2013 1.03%, 2012 -0.01%, 2011 0.80%, 2010 1.10%. However it is no more than the average growth rate between 1955 and 2010 of 2.1%.
As charts that I have posted earlier clearly show, this average of around 2.1% really does reflect what looks like a pretty constant trend over the past. We have had recessions before, but they were followed by above average growth: in 1983 GDP per head grew by 4.2%, and in 1994 by 3.8%. So as recoveries go, this one has been terrible.
There are signs that the Eurozone recovery may also be beginning. If this turns out to be the case, you are sure to read a great deal about how this is all down to the ECB finally adopting Quantitative Easing. I suspect you will read rather less about another explanation, which is that fiscal contraction began to ease off last year, and that this will continue into 2015. The chart below is from the March 2015 OECD Economic Outlook, so the 2014 numbers should be fairly reliable estimates.
|Government underlying primary balances: OECD Economic Outlook March 2015|
The message in both cases is simple. Fiscal austerity reduces growth. When fiscal austerity stops, growth can resume. It’s a message that rather a lot of people who were responsible for the fiscal tightening would rather you didn’t hear.