British Chambers of Commerce UK Monthly Economic Review Feb 2014

Page 1

UK Monthly Economic Review February 2014 (Based on January 2014 data releases)

Monthly headlines:  UK economic growth reaches six-year high, and the IMF raises its forecast for UK GDP  Although most sectors saw a rise in output in Q4, services remains the key driver of growth  UK employment reaches historic high, but an early interest rate rise is not expected

05/02/2014

6.0 4.0 2.0

2013 Q4

2013 Q2

2012 Q4

2012 Q2

2011 Q4

2011 Q2

2010 Q4

2010 Q2

2009 Q4

2009 Q2

-1.0

2008 Q4

-0.5

2008 Q2

0.0

-1.5

-2.0 -4.0

Quarterly GDP growth Annual GDP growth

-2.0

0.0

% Balance

0.5

2007 Q4

Quarterly GDP Growth %

1.0

-6.0

-2.5 -3.0

-8.0 Source: ONS Preliminary GDP estimate, Q4 2013

Chart 2: UK GDP by sector, Q4 2013 1.0 0.8

GDP Growth %

0.6 0.4 0.2 0.0

Agriculture

Production

Construction

Services

-0.2 -0.4 Source: ONS Preliminary GDP estimate, Q4 2013

Chart 3: Retail Sales

2.0

-2.0 -3.0

UK Economic Review

Dec-13

Oct-13

Aug-13

Jun-13

Apr-13

Feb-13

-1.0

Dec-12

0.5

Oct-12

0.0

Aug-12

1.0

Jun-12

1.0

Apr-12

1.5

Feb-12

2.0

Change %

3.0

Dec-11

...with growth in most areas of the economy... Three out of the four main sectors of the UK economy – agriculture, production, and services – grew in Q4. Industrial output rose by 0.7% in Q4. This improvement was driven by a 0.9% rise in manufacturing output, which is in line with the latest QES. However, services remains the dominant sector of the UK economy, growing by 0.8% in Q4 (see Chart 2) and accounting for 87% of the overall increase in GDP. This mirrors the latest QES with all key service sector balances rising in Q4. Construction was a slight drag on growth, falling by 0.3% in Q4. . ...retailers enjoyed a bumper December… Retails sales rose by 2.6% in December. In annual terms, retail sales were up 5.3%, the fastest rise since October 2004. However, the underlying trend remains fairly subdued, with retail sales growing by just 0.4% in Q4. December’s bumper outturn was preceded by just a 0.1% rise in November and a 0.9% fall in October. This suggests that UK consumers merely shifted their purchases closer to Christmas, rather than a marked improvement in sales. In 2014, we expect household consumption to be a major contributor to growth.

Chart: 1 Real GDP Growth

1.5

Change %

UK GDP grew by 0.7% in Q4 2013... The first official estimate of GDP revealed that the UK economy grew in real terms by 0.7% in Q4 2013 (see Chart 1), only slightly below the growth of 0.8% recorded in Q3. This means that for 2013 as a whole, the UK economy grew by 1.9%, the fastest growth since 2007. UK economic output is now estimated to be just 1.3% below its pre-recession peak in Q1 2008. This is in line with the latest Quarterly Economic Survey (QES) in which most of the key national balances rose in Q4 and supports our view that the UK economic recovery is gathering momentum.

0.0 -0.5

Monthly change Quarterly change (RHS)

-1.0 Source: ONS Retail Sales, December 2013

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British Chambers of Commerce UK Monthly Economic Review Feb 2014 by West Cheshire and North Wales Chamber of Commerce - Issuu