UK Monthly Economic Review, March 2014

Page 1

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

Monthly headlines:  UK GDP unrevised in Q4, business investment and net trade helping to drive growth.  Bank of England's forward guidance updated as the jobs market continues to improve.  Inflation falls below target and there are early signs that the squeeze on wages is easing. .Economic growth in Q4 unrevised at 0.7%...

05/03/2014

-1.0

20

-1.5

Quarterly GDP growth

-2.0

Manufacturing domestic sales

0 -20 -40

Services domestic sales

-2.5

Balance %

0.0

-0.5

2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4

Quarterly GDP Growth %

40 0.5

-3.0

-60 Sources: BCC QES Q4 2013, ONS Second GDP estimate Q4 2013

20

30

15

20

10

10

5 0

2013 Q3

2013 Q1

2012 Q3

2012 Q1

2011 Q3

2011 Q1

2010 Q3

2010 Q1

2009 Q3

2009 Q1

-20

2008 Q3

-10

2008 Q1

0 -5

Quarterly Change %

Chart 2: Business Investment 40

-10

-30

-15

-40 Services Investment - plant & machinery (LHS)

-50

-20

Manufacturing Investment - plant & machinery (LHS) Business investment (RHS)

Sources: BCC QES Q4 2013, ONS Business Investment Q4 2013

Chart 3: UK's Net Trade Position 2013 Q4

2013 Q2

2012 Q4

2012 Q2

2011 Q4

2011 Q2

2010 Q4

2010 Q2

2009 Q4

2009 Q2

2008 Q4

-2

2008 Q2

0 2007 Q4

...the UK's trade balance improves... .The second estimate of Q4 2013 GDP revealed that exports played a positive role in boosting growth in the quarter. The deficit in the UK’s trade balance (difference between what we export and import) narrowed from £8.2 billion in Q3 2013 to £6.6 billion in Q4 2013 (see Chart 3) with exports increasing by 0.4% and imports falling by 0.9%. As a consequence, net trade contributed 0.4 percentage points to GDP growth in Q4. This is in contrast to Q3 when net trade was a drag on growth, wiping 1.1 percentage points off GDP growth in the quarter.

60

1.0

Balance %

...as business investment boosts growth... The latest Q4 2013 GDP estimate revealed that the UK economy was less reliant on consumer spending to drive growth compared to previous quarters. Consumer spending rose by just 0.4% in Q4, while business investment grew by 2.4% over the same period. This improvement is in line with the latest QES results with all of the national investment balances increasing in Q4 (see Chart 2). However, the improvement recorded in the official figures is from a very low base and business investment remains 20% below its pre-crisis peak in Q1 2008.

Chart: 1 Real GDP and Domestic Sales

1.5

-4 Billions £

The second official estimate for Q4 2013 growth in GDP was unrevised at 0.7% (see Chart 1). This mirrors the Q4 2013 Quarterly Economic Survey (QES) in which most of the national balances improved. In annual terms, the UK economy grew by 2.7% in Q4, down slightly from the previous estimate of 2.8%. GDP growth for 2013 as a whole was revised down slightly to 1.8%, from 1.9%. However, these revisions do little to alter the UK’s growth picture. Overall, the latest GDP figures support our view that the economic recovery is strengthening.

-6 -8

-10 -12 -14 -16

UK Economic Review

Source: ONS Second GDP estimate Q4 2013

Source: ONS Retail Sales, December 2013

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UK Monthly Economic Review, March 2014 by West Cheshire and North Wales Chamber of Commerce - Issuu