What Does UK’s Latest GDP Data Tell Us About The Economy?

United Kingdom’s GDP remained flat in the final quarter of the passing year, traversing through the political uncertainty and looming deadline of Brexit. However, some green shoots started appearing in the final month of the year, when the economy bounced back from degrowth of the previous month (November) to a growth of 0.3 per cent. Annual growth too was reported to be up marginally to 1.4 per cent in 2019 as compared to 1.3 per cent in 2018.

A guide to GDP Measures in the UK

Gross domestic product (GDP) growth is the fundamental sign of financial and economic performance in a particular period for an economy. There are three approaches used to quantify GDP, which are, the output approach, the expenditure approach as well as the income approach.

There were extended challenges around changing the essential measures around GDP development for Quarter 4 (October 2019 to December 2019), generally on account of the elevated weakness around the impact of the UK’s orchestrated exit from the EU on the activity of various institutions and organisations. This has been reflected in the changes that have been applied to the consumption measures. Hence, the ONS (Office of National Statistics) has prescribed that the breakdown of the expenditure approach to deal with GDP should be considered with regards to these alterations.

After EU withdrawal

As the UK leaves the EU, it is significant that ONS’ insights keep on being of high accuracy and at par to the global levels. During the transition time frame, those UK insights that line up with EU practice and rules will keep on performing alike as before 31st January 2020.

UK GDP Scenario

On 11th February 2020, the Office for National Statistics (ONS) reported the GDP data for the fourth quarter from October 2019 to December 2019. ONS also reported the time series for Gross Value added (GVA) in the fourth Quarter of 2019 as well as the GVA for the full year 2019. The organisation also put out the statistics for Index of Production for the month of December 2019 in the United Kingdom.

As per the research presented in the ONS data, it has been reported that UK’s Gross Domestic Product for the fourth quarter 2019, was flat, as compared to the third quarter in terms of volume. This was followed by a revised growth of 0.5 per cent in the country during the third quarter. An increase of 1.1 per cent year on year was reported for Q4 2019, as compared to 1.2 per cent year on year growth in the GDP reported during Q4 2018.

(Source: Office for National Statistics)

Broader factors impacting the GDP in Q4 2019

The UK GDP development has been unpredictable all through 2019, partially reflecting changes in the planning of action in regards to the UK’s previous deadline for leaving the European Union. In spite of the fact that there is some proof, both, presented by external factors as well in the current data points, a lot of stockpiling has taken place during the later period of 2019 just prior to the second planned exit from the EU date in the month of October, initial estimates suggest that this was to a lesser degree than that occurring before the first planned EU exit date, which was supposed to be in the month of March. As per the research of the ONS, at face value, the main important statistics did not show solid proof with accretion, yet when we take a glimpse at the month to month means of imports from the EU we do see a sample steady with that found ahead of time of the UK’s original exit date toward the end of March, but less articulated. The degree to which buildup occurred in Quarter 4 2019 will become clearer as we get extra information.

The underlying force in the UK economy kept on giving indications of easing back. Quarterly GDP development has been somewhere in the range of 0.2 per cent and 0.3 per cent in 2019 by and large, proceeding with the easing back that has been experienced over the past five years. As opposed to the same quarter in the previous year, the UK economy displayed growth of 1.1 per cent, as shown in the chart above.

Economic Indicators for the United Kingdom

% growth
  Chained volume measures Current market prices GDP implied
GDP Household Gross fixed GDP per GDP Compensation deflator
expenditure capital formation head of employees  
Seasonally adjusted
2018 1.3 1.6 -0.2 0.7 3.5 4.4 2.1
2019 1.4 1.4 0.4 0.8 3.3 4.3 1.9
               
Q1 2018 0.1 0.4 -1.2 -0.1 0.7 1.2 0.6
Q2 2018 0.5 0.6 -0.2 0.4 1 0.8 0.5
Q3 2018 0.6 0.4 0.3 0.4 1.1 1.5 0.5
Q4 2018 0.2 0.2 -0.1 0.1 0.4 1.5 0.2
               
Q1 2019 0.6 0.3 1.1 0.5 1.3 0.4 0.7
Q2 2019 -0.1 0.5 -0.5 -0.3 0.4 1.5 0.5
Q3 2019 0.5 0.4 0.3 0.4 0.9 0.9 0.4
Q4 2019 0.0 0.1 -1.6 -0.1 0.1 0.7 0.1

 

(Source: Office for National Statistics)

Performance of Various Sectors

Services output stayed restrained in the last quarter of 2019, where it expanded by just 0.1 per cent. This is its lowest rate since the middle of 2016. The slowdown has been primarily due to the downfall in a few business segments, most notably through wholesale and retail activity.

Real estate activities displayed growth of 0.3 per cent in Quarter 4, reflecting quality in real estate agencies as well as the output from real estate construction activity. There was additionally an expansion in education services, which depicted a growth of 0.7 per cent. There have been counterbalancing downfalls in a few different ventures, most remarkably wholesale and retail activity in the country, which fell in the last quarter for the first time since the Quarter 1 (Jan to Mar) 2017, commonly mirroring the 1.0 per cent downfall that it displayed in retail market in the last three months of 2019.

The 0.8 per cent quarterly decline in production output has been predominantly driven by the continued fall in manufacturing output. While there is some external evidence of an increase in stock building in the latest quarter, it is difficult to undo the extent to which this has affected manufacturing output over this period, despite some evidence of an activity being brought forward ahead of the second intended EU exit date in October.

GDP Chart Sector-wise

(Source: ONS)