UK Q4 GDP strength fading in Q1
Simon Ward
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UK data on industrial / construction output and services turnover released today suggest a further upward revision to fourth-quarter GDP growth but a significant slowdown in the current quarter.
The last GDP release on 22 February reported growth of 0.7%, or 0.71% before rounding, between the third and fourth quarters of 2016. This estimate incorporated quarterly increases in industrial and construction output of 0.3% and 0.2% respectively. These numbers were revised up to 0.4% and 1.0% in today’s releases, implying a rise in GDP growth to 0.76%, assuming no other changes. Services output seems unlikely to be revised down, since services turnover – which feeds into the output data – also grew by slightly more than previously estimated in the fourth quarter. The revised GDP release on 31 March, therefore, may report quarterly growth of 0.8%.
January data, however, suggest that current-quarter growth will be significantly lower. Industrial and construction output both fell by 0.4% between December and January, while services activity also seems to have weakened slightly, based on the turnover data. GDP is estimated here to have eased back by 0.2% in January to stand 0.3% above the fourth-quarter level. Assuming a resumption of moderate growth in February / March, this suggests a first-quarter GDP increase of 0.4-0.5%. Note that another batch of monthly data will appear before the Office for National Statistics releases its preliminary first-quarter estimate on 28 April.
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