UK Q4 GDP Annual Growth Below Forecasts

The UK economy expanded 1.3 percent year-on-year in the fourth quarter of 2018, down from a revised 1.6 percent in the previous period and slightly below market expectations of 1.4 percent. It has not been weaker since the second quarter of 2012 and continues its relatively subdued performance over the last year.

On the expenditure side, household expenditure rose 1.9 percent in the fourth quarter (vs 1.8 percent in Q3); and government spending advanced 0.8 percent (vs -0.5 percent in Q3). By contrast, fixed investment dropped 1.4 percent (vs -0.3 percent in Q3) as business investment slumped by 3.7 percent, the largest fall since the first quarter of 2010.

Exports declined 0.9 percent, easing from a 1.7 percent drop in Q3; while imports surged 1.7 percent, reversing a 0.1 percent decrease the previous period. As a result, the trade deficit widened to £7.097 billion from £3.225 billion in Q4 2017.

On the production side, the service industries expanded 1.9 percent (vs 1.8 percent in Q3), as output rose for: distribution, hotels and restaurants (3.4 percent vs 3.3 percent); transport storage and communications (3 percent vs 4 percent); business services and finance (1.8 percent vs 1.7 percent); and government and other services (0.6 percent vs unchanged). Industrial production contracted 1 percent (vs 0.7 percent in Q3), as output fell for: manufacturing (-1.5 percent vs 0.9 percent); utilities (-1.7 percent vs -0.5 percent); and water supply, sewerage, waste management and remediation activities (-1.6 percent vs -1.2 percent). Mining & quarrying output jumped 5.9 percent, after a 2.6 percent growth in the previous period. Construction expansion eased to 0.9 percent from 1.5 percent in Q3.

Considering 2018 full year, UK GDP increased by 1.4 percent, the weakest it has been since 2009. Household consumption and government spending both contributed positively to GDP growth. There was also a positive contribution of gross capital formation in 2018, although this reflects movements in inventories and valuables, as gross fixed capital formation was flat last year. It was the first time that there had been no increase in capital investment since 2009, in which the UK was in the midst of the effects of the financial crisis. Having provided a boost to GDP growth in 2017, net trade fell in 2018 – a possible reflection of the waning effects of sterling’s depreciation and a slowing in momentum in the global economy.

 UK Q4 GDP Annual Growth Below Forecasts

ONS | Joana Ferreira |
2/11/2019 10:18:59 AM