Domestic Demand in United Kingdom
United Kingdom - Domestic Demand
Growth rebounds in Q1, although uptick is likely to be temporary
Growth accelerated to 0.5% in quarter-on-quarter terms in Q1 2019 (Q4 2018: +0.2% quarter-on-quarter), according to preliminary data released by the Office for National Statistics (ONS). The reading matched market expectations and growth consequently rose from 1.4% to 1.8% in year-on-year terms. However, the reading was driven in part by firms increasing stocks in preparation for a possible no-deal Brexit, which spurred the largest expansion in the manufacturing sector in over three decades. This dynamic is unlikely to be repeated in the second quarter.
Looking at expenditure components, private consumption was buoyant (Q1: +0.6% qoq; Q4: +0.3% qoq), likely supported by rock-bottom unemployment and solid wage growth. Government consumption also lent support (Q1: +1.4% qoq; Q4: +1.3% qoq), potentially reflecting stockpiling within the public sector. Moreover, fixed investment was up 2.1% (Q4: -0.6% qoq), on higher public and business investment. In particular, business investment returned to growth following four consecutive quarters of contraction, although again this could have been partially linked to stockbuilding.
The external sector subtracted 2.2 percentage points from growth in Q1, down sharply from the 0.2 percentage-point subtraction in Q4. This was largely driven by a surge in imports (Q1: +6.8% qoq; Q4: +2.1% qoq), as a significant portion of stockpiling came from abroad. Exports, meanwhile, were flat (Q4: +1.6% qoq), with lower services exports offsetting higher goods exports.
Looking ahead, the economy is likely to grow at a more moderate pace over the next few quarters as the stockpiling effect unwinds and Brexit uncertainty continues to delay firms’ investment decisions. Nevertheless, the strong labor market should support private consumption, while the government’s fiscal stance will become less restrictive. The evolution of Brexit is the key risk to the outlook.
According to James Smith, an economist at ING:
“We still think there is the potential for a correction in overall economic growth in the second quarter. Manufacturing contributed 0.2 percentage points to first-quarter GDP growth, and this is unlikely to be repeated over the coming months - especially given the uncertain outlook for global growth.”
UK GDP Forecast
In its May inflation report, the Central Bank upgraded its GDP forecasts for this year and next, and now expects growth of 1.5% and 1.6% respectively. Last month, Met the why particular panelists projected that GDP would expand 1.3% in 2019 and 1.4% in 2020. A new Consensus Forecast will be published on 28 May.
United Kingdom - Domestic Demand Data
|Domestic Demand (annual variation in %)||2.7||3.6||2.4||2.2||1.4|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Facts
|Bond Yield||1.11||-3.04 %||May 13|
|Exchange Rate||1.30||-0.35 %||May 13|
|Stock Market||7,164||-0.26 %||May 13|
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May 22, 2019
Consumer prices rose 0.6% in April over the previous month, up from March’s 0.2% increase.
May 14, 2019
In the January-March period, the unemployment rate fell to a new multi-decade low of 3.8%, while the employment rate was the joint-highest on record.
May 11, 2019
Growth accelerated to 0.5% in quarter-on-quarter terms in Q1 2019 (Q4 2018: +0.2% quarter-on-quarter), according to preliminary data released by the Office for National Statistics (ONS).
May 11, 2019
Industrial production rose 0.7% in March over the prior month according to the Office for National Statistics, following February’s 0.6% increase.
United Kingdom: Services PMI edges back into positive territory in April, manufacturing PMI dips as stockpiling eases
May 3, 2019
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) rose from a multi-year low of 48.9 in March to 50.4 in April.