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UK CommentGDP growth revised down

  1. GDP growth for Q4 2017 revised down to 0.4 percent, from 0.5 percent
  2. Private consumption growth was unchanged in Q4, but business investment much weaker
  3. GDP growth should decelerate further this year
GDP growth revised down in Q4 2017 to 0.4 percent, from 0.5 percent previously
GDP growth in the UK in Q4 was revised down to 0.4 percent in the second release, from 0.5 percent in the first estimate. The GDP growth rate for 2017 was also revised down to 1.7 percent, from 1.8 percent previously. The consensus estimate was for no change.
Private consumption growth unchanged, business investment flatlined
On the supply side, the downward revision was driven by revisions to production estimates, partially offset by upward revisions to construction. The largest contributor to GDP growth was, as always, the services industries, which increased by 0.6 percent overall. Production output was estimated to have increased by 0.5 percent, revised down by 0.1 p.p. from the preliminary estimate of GDP. Construction output was estimated to have decreased by 0.7 percent in Q4, revised upward from a decrease of 1.0 percent in the preliminary estimate of GDP. This is the third consecutive quarter of contraction for the construction sector. On the demand side, growth in private consumption was broadly unchanged from Q3, contributing 0.21 p.p. to overall GDP growth in Q4 after 0.24 p.p. in Q3. The annual rate of growth in private consumption for 2017 was 1.8 percent, compared with 3.1 percent in 2016. This is the lowest rate of annual growth in household spending since 2012. According to the ONS, the lower rate of growth can in part be explained by the rise in prices faced by consumers. Gross fixed capital formation contributed 0.18 p.p. to GDP growth in Q4, up from 0.12 p.p. in Q3. However, business investment was flat, while general government investment and capital formation in private dwelling sectors contributed the most, growing by 5.6 percent and 1.4 percent respectively. The flat quarter-on-quarter performance of business investment in Q4 follows growth of 0.9 percent in Q3. Both exports and imports pulled down GDP growth, with a combined negative contribution of 0.5 p.p. from net trade. However, the numbers are affected by the trade in non-monetary gold. Stripping out that effect, the contribution was -0.1 p.p.
GDP growth should decelerate further this year
On balance, growth was slightly weaker in the last quarter of 2017 than previously expected. According to the second estimate, growth in 2017 decelerated to 1.7 percent, from 1.9 percent in 2016. We expect a further deceleration in GDP growth this year. However, short-term momentum indicates that our estimate of 1.3 percent for 2018 might be too low. Economic sentiment, as measured by the PMI surveys, has fallen back at the start of the year, but nevertheless indicates that growth should hold up relatively well in the short term.




Kari Due-Andresen

Chief Economist Norway

Norway and UK

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