Consumption in United Kingdom
United Kingdom - Consumption
Comprehensive data confirms weak start to the year
The economy started 2018 on weak footing, with comprehensive data released by the Office for National Statistics (ONS) on 25 May putting quarter-on-quarter GDP growth at a mere 0.1% in Q1, unchanged from the preliminary estimate and marking the weakest reading since 2012. The Q1 outturn was far below the EU average of 0.4%. In annual terms, the economy grew 1.2%, down from 1.4% in Q4.
Q1’s figure contradicts leading data pointing to a stronger first quarter, as well as the Bank of England’s expectation that growth would be revised up from the preliminary estimate. In addition, the ONS continued to argue that the downward impact on the economy from bad weather was limited, in contrast to the Central Bank’s assessment. Another possible one-off factor behind the poor performance was the collapse of construction company Carillion, which could have contributed to the sharp contraction in construction activity in the quarter.
On the domestic front, private consumption growth lost steam, dipping from an already mediocre 0.3% to 0.2% qoq in Q1. This is in line with weak retail sales figures throughout the quarter, reflecting pressure on household budgets and pessimistic consumer sentiment. In addition, fixed investment growth also slipped (Q1: +0.9% qoq; Q4: +1.1% qoq) on a fall in business investment—the first such decline in over a year—likely owing to pervasive Brexit uncertainty causing firms to delay investment decisions. Public consumption grew 0.5% (Q4: +0.4% qoq) as the government adopts a slightly less restrictive spending policy amid an improving fiscal situation.
The external sector had no impact on growth in the quarter, with exports of goods and services shrinking 0.5% (Q4: -0.9% qoq), and imports of goods and services contracting 0.1% (Q4: +0.4% qoq).
Looking ahead, quarter-on-quarter growth will likely bounce back somewhat in the second quarter as temporary factors subside. Government consumption will likely provide some support, while easing inflation and higher wage growth should see household purchasing power gradually recover. However, economic growth is likely to remain moderate. Despite a slight recovery in earnings, private consumption will remain constrained by pessimistic sentiment and low savings rates, while business investment will remain subdued until greater clarity emerges regarding the UK’s future trading relationship with the EU.
UK GDP Forecast
The Central Bank downgraded its growth forecasts in May, and now expects the economy to expand 1.4% in 2018 and 1.7% in 2019. Met the why particular panelists expect GDP to grow 1.4% in 2018 and 1.5% in 2019.
United Kingdom - Consumption Data
|Consumption (annual variation in %)||1.7||2.1||2.6||2.9||1.7|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Facts
|Bond Yield||1.28||-3.04 %||Jun 19|
|Exchange Rate||1.32||-0.35 %||Jun 19|
|Stock Market||7,604||-0.26 %||Jun 19|
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United Kingdom: BoE stays put in June, although consensus within the Committee is slowly shifting towards a rate hike
June 21, 2018
At its meeting ending on 20 June, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted to leave the Bank Rate unchanged at 0.50%.
June 13, 2018
Consumer prices rose 0.4% in May over the previous month, matching April’s figure.
June 12, 2018
The unemployment rate remained at a multi-decade low of 4.2% in the February-April period, where it has been for three consecutive rolling quarters.
June 11, 2018
Industrial production fell 0.8% in April over the prior month according to the Office for National Statistics, contrasting March’s 0.1% rise and undershooting analysts’ expectations.
United Kingdom: Services and manufacturing PMIs rise in May, pointing to pick-up in economic growth following Q1’s lull
June 5, 2018
Growth in the UK services sector picked up to a three-month high in May, with the IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) rising from 52.8 in April to 54.0.