UK services turnover strengthened in March, supporting the view here that economic growth remains solid, in contrast to downbeat consensus commentary.
The turnover survey is an important input to the services output index, which accounts for 79% of the output-based measure of GDP. Real turnover* fully reversed a fall in February to stand well above its fourth-quarter level – see first chart.
The estimate by the Office for National Statistics (ONS) that GDP rose by 0.4% in the first quarter assumed that services output grew by 0.2% between February and March. The turnover result suggests that this assumption will be met or exceeded. Revised GDP figures to be released on 26 May may confirm 0.4% growth for the economy as a whole last quarter but the increase in gross value added excluding oil and gas extraction could be revised up from 0.4% to 0.5%.
The consensus believes that the economy is slowing in the current quarter, with the Bank of England projecting a GDP rise of 0.3%. This belief, however, relies importantly on weaker business survey evidence that may have been “contaminated” by Breferendum uncertainty.
Any slowdown should prove short-lived assuming a Bremain vote, judging from upbeat money and credit trends – second chart.
Addendum: Revisions to GDP data up to 2014 released by the ONS today show stronger growth than previously reported in 2010, 2012 and 2014, offset by weaker outturns in 2011 and 2013. Annual growth in 2014 is now estimated at 3.1% versus 2.9% previously and a forecast here at the time of “about 3%”.
*Total ex. wholesale trade turnover, deflated by services producer prices, seasonally adjusted.
