Macro of the Week – UK GDP slowing

Mon 26 Feb 2018

The UK economy grew more slowly than previously estimated in Q4 2017, increasing by 0.4% quarter-on-quarter according to the second estimate by the ONS. This figure was a 0.1% downgrade from the original estimate. The downward revision was due to slower growth in production industries. This means that the UK grew by 1.7% in 2017, down from the 1.9% growth seen in 2016 and the slowest pace since 2012. Household spending grew by 1.8% in 2017, also the slowest annual rate since 2012. Spending has been squeezed by rising inflation and weak wage growth. The Q4 2017 year-on-year growth rate was 1.4%, the slowest among wealthy nations. Other data has supported the fact that the UK economy is slowing. CBI Retail Reported Sales were down in February. In January both manufacturing and services PMIs were weaker, resulting in a composite figure of 53.5 down from 54.9. Industrial production was flat in December year-on-year, down from 2.6% growth previously and the ILO Unemployment Rate for the 3 months to December rose from 4.3% to 4.4%, at a time where unemployment in most major economies is falling. Despite the weak data the governor of the Bank of England, Mark Carney, said that he expects interest rates to rise.