UK GDP Contraction Confirmed in Q2

UK gross domestic product fell 0.2 percent in the second quarter of 2019, unrevised from the previous estimate and compared to the previous period's figure of 0.6 percent. Gross capital formation contracted sharply, while private consumption, government spending and net trade contributed positively to GDP growth. On the production side, industrial output fell the most since the fourth quarter of 2012.

On the expenditure side, GCF – which includes gross fixed capital formation (GFCF), changes in inventories and acquisitions less disposal of valuables – declined 15.6 percent in Q2. This largely reflects a fallback from Q1, where GCF was boosted by the build-up of stocks held by some businesses ahead of the UK’s original exit date from the European Union at the end of March, alongside notable movements in unspecified goods – which includes non-monetary gold – which fall within the valuables component of GCF. In Q2, changes in inventories (including both balancing and alignment adjustments) subtracted 1.19 percentage points from GDP growth.

GFCF decreased by an unrevised 0.9 percent, in part reflecting a 3.6 percent fall in government investment. This was driven by widespread falls. Business investment also fell by 0.4 percent in the latest quarter, driven by declines in investment in information and communication technology (ICT) equipment and other machinery and equipment.

Meanwhile, household consumption increased 0.4 percent, due in part to a 0.9 percent increase in expenditure on housing; and government consumption rose 1.1 percent, driven by increases in government spending in a number of sectors, including health and education.

The UK trade deficit narrowed sharply to £10.453 billion from a record £23.293 in the previous period. Exports dropped 6.6 percent (vs 1.6 percent in Q1) while imports plunged 13.0 percent (vs 10.3 percent in Q1).

UK GDP Contraction Confirmed in Q2

ONS | Joana Ferreira |
9/30/2019 9:10:15 AM