Domestic Demand in United Kingdom

United Kingdom Domestic Demand | Economic News & Forecasts

United Kingdom - Domestic Demand

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 - Domestic Demand Data

2013  2014  2015  2016  2017  
Domestic Demand (annual variation in %)2.7  3.6  2.4  2.2  1.4  

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United Kingdom Facts

Bond Yield1.33-3.04 %Jun 14
Exchange Rate1.33-0.35 %Jun 14
Stock Market7,766-0.26 %Jun 14

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