What Is A Third Quartile Recession? ____________________________________
How bad might things get? A 'Third Quartile' recession is one in which only 25 per cent of all recessions are worse. We are easily on track for this.
In the recession of the early 1990s, the total cumulative fall in output below the 1990 peak was 5.8 per cent, and the level of 1990 was not regained until 1993. In the early 1980s, the 1979 level wasn't regained until 1983, another 4 year shortfall. But the total drop in output was even worse, at 7.4 per cent.
Looking at every single recession in the West since the late 19th century, the last two recessions in the UK have both been 'third quartile events' in terms of how long they lasted. And the 1980s one was even worse in terms of size. Only 25 per cent of all recessions have been worse than a total output fall below peak of 6.9 per cent.
So if we have a 'third quartile recession': output will not get back to the 2008 peak until 2012. And the total cumulative fall below the 2008 level will be around 7 per cent. The table below compares the third quartile recession with UK post-war experience. If this is what we are heading for, the 1979-1981 example is the closest.
1970s |
1980s |
1990s |
3rd Quartile |
||
| Peak to Trough Duration | 73 - 75 |
79 - 81 |
90 - 91 |
2 Years |
|
| Recover to Peak Duration | 73 - 76 |
79 - 83 |
90 - 93 |
3 Years |
|
| Peak to Trough Fall % | 1.9 |
3.5 |
1.4 |
4.9 |
|
| Recovery to Peak Loss % | 3.2 |
7.2 |
2.5 |
6.9 |
