ONS confirms UK's weak finish to last year
Economists were divided on the immediate outlook for UK economic growth after quarterly gross domestic product growth was confirmed at 0.2% for the final quarter of last year.
The Office for National Statistics confirmed that the economy slowed in the fourth quarter from 0.7% in the third quarter, which was revised up from the initial reading, and 0.4% in the second.
Year-on-year growth was revised up to 1.4% from 1.3%, while a more detailed picture emerged of the economy at the end of 2018.
The quarter-on-quarter drop in business investment was not as bad as first thought, revised to 0.9% from 1.4%, amd although the negative effect of net trade was estimated to have subtracted 0.2 percentage points from quarterly GDP growth, not 0.1ppts as first thought.
Growth in households’ spending was not as good as initially stated, revised down to 0.3% from 0.4%, though this was funded by growing income, with a 1.0% quarterly increase in real household disposable income being the largest since the first half of the previous year.
Rob Kent-Smith, the ONS’s head of GDP, said: “GDP for the final quarter of last year remained unrevised, with services providing the only source of growth.
“Business investment also continued to decline while households spent more than they received for an unprecedented nine quarters in a row.”
Economist Andrew Wishart at Capital Economics said that despite Westminster Brexit impasse he felt the weak GDP growth at the end of last year “probably marks a trough”, with a robust monthly increase in GDP in January and good indications for consumer spending since suggesting that growth ticked up to 0.3% in the first quarter.
With more detailed figures on household finances painting a more positive picture, he said the increase in real household disposable income illustrated that households are benefitting from solid wage growth and below-target inflation, helping raise the saving ratio and suggesting that household spending could support growth in 2019.
“The prospects for the economy further ahead, of course, will depend on how Brexit pans out,” he said. “Overall, the data released today illustrates that if a no deal Brexit is avoided, solid consumer spending can underpin a strengthening in the economy.”
Samuel Tombs at Pantheon Macroeconomics said that while there was “tentative evidence” of a pick-up in stockpiling pre-Brexit, as inventories rose by the most since the end of 2016, he was sceptical it is providing any real support to GDP growth, given that hoarded goods will be imported.
“Looking ahead, we expect Q1 to be a carbon copy of Q4, with growth in households' spending ticking over despite Brexit uncertainty, but investment and net trade continuing to drag on growth.”