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Is the financial crisis finally behind us?

After four years, Britain's economic output is back to where it was before the financial crisis.

Official figures have confirmed that the economy has finally made up the ground it lost in the 2008-09 global crisis. GDP fell by 7.2% back then, but following a 0.8% rise in the second quarter, output is 0.2% higher than at the previous peak in the first quarter of 2008.

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It was a glacial recovery: growth never took more than four years to get back to its previous high after all the recessions in the 20th century.

Meanwhile, the International Monetary Fund warned that it thinks sterling is 5-10% overvalued, and a sharp rise in mortgage approvals in June suggests that the recent slowdown in house prices will soon be over.

What the commentators said

But the recovery doesn't look "well-supported". It is still very reliant on "artificial monetary stimulus", and living standards have yet to recover. GDP per capita, for instance, is still around 5% below the peak. Real wages are 10% below.

We won't be able to rely on much of a boost from exports going forward, as Ian Campbell pointed out on Breakingviews.com. The global economy isn't exactly expanding at lightning speed, and the European economy is weakening. Bundesbank reckons that German growth slid to zero in the second quarter. The high pound doesn't help matters.

Still, the domestic outlook is encouraging, said Capital Economics. Credit constraints are loosening, and easing inflation bodes well for real wages and consumption, which is key to GDP growth. Another two years of robust growth should be on the cards.

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