UK onshore GDP exceeds prior peak in January
Simon Ward
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First-quarter GDP growth is on course to match or beat the Bank of England’s 0.9% expectation, judging from January output figures for services, industry and construction, together accounting for 99% of the economy.
Output levels in January were above fourth-quarter averages in all three sectors – by 0.7% in services, 0.4% in industry and 1.8% in construction. Based on shares in the economy of 78%, 15% and 6% respectively, these gains imply a 0.75% rise in GDP between the fourth quarter and January.
Assume, reasonably, that GDP rises by a further 0.25% per month in February and March, equivalent to a 3% annualised growth rate. First-quarter expansion would then be 1.0%.
According to the February Inflation Report, the Bank expects first-quarter GDP growth to be estimated initially at 0.8%, with a subsequent revision to 0.9%. A 1.0% initial print*, therefore, would be another upside surprise for policy-makers.
GDP in the fourth quarter of 2013 was still 1.4% below its peak reached in the first quarter of 2008 but the shortfall in onshore output – i.e. excluding North Sea oil and gas extraction – was only 0.5%. Onshore GDP, therefore, is already at a new high, based on the January output data – see chart.
*The preliminary estimate is scheduled for release on 29 April.
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