A monthly GDP estimate derived from data on services and industrial output fell by 0.2% between February and March, the smallest decline since October – see chart. The slower pace of contraction is consistent with better purchasing managers' survey results in March; PMI readings continued to improve in April.
The monthly estimate was 0.3% below its first-quarter average level in March, suggesting that second-quarter GDP figures – released in late July – will show a further decline. Based on current PMI readings, however, this could be smaller than the 0.6% fall implied by the Bank of England's latest Inflation Report forecast. The Bank is projecting a further contraction of 0.3-0.4% in the third quarter.
Today's numbers confirm a 1.9% GDP fall between the fourth and first quarters, with the expenditure breakdown showing broad-based weakness. A silver lining, however, is that destocking rose further to reach 2.0% of the level of GDP – the highest on record in quarterly data going back to 1955. A slowdown in stock liquidation will provide important support to the economy later in 2009.
