MacroScope

Remember that old chestnut about how it’s a recession when your neighbour loses his job and it’s a depression when YOU lose yours?

Well, research carried out by Datamonitor suggests a similar divergence between British consumer perception and behaviour during the current economic downturn.

The survey found that 90 percent of UK consumers believed that the country was in the grip of recession but slightly over half of them (53 percent) said their household finances have either improved or stayed the same. Similarly, twice as many people feel their job is safe as those who have actually lost or fear they will lose their jobs.

“In the majority of households there does not appear to have been any significant increase in financial strain that results in consumers displaying recessionary behavior,”

“On the contrary, only 8 percent globally think that their household’s general financial situation has worsened significantly since before the downturn, and thousands have actually benefitted from reduced mortgage repayments, for example.”

If it takes two successive quarters of falling GDP to enter a recession, how can a country emerge from recession with only one quarter of growth?  In the past week or so, journalists have declared the recession over in France, Germany and now Japan.  Of course, most reports rightly ask how long this will last and stress that a genuine recovery is far from certain.

Some people regard the two quarters definition of a recession as arbitrary and a bit silly, something supposedly cooked up by one of Lyndon Johnson’s economic advisers  to avoid acknowledging a downturn until after the next election.

But it does serve a serious purpose: At least it reduces the risk that we’ll be misled by a statistical blip in one quarter’s data which might be revised away in the next release.