UK National Accounts, 4th Quarter 2022: The Office for National Statistics (ONS) has just published the national accounts for the 4th quarter. The new estimate shows that the UK economy grew marginally (+0.1% quarter-on-quarter) in the final period of last year – this is an upward revision from the previous estimate of zero growth.
They have also revised the annual growth rate from +4.0% to +4.1% despite a varied pattern of revisions to the individual quarters – Q1 and Q3 were revised down slightly while Q2 and Q4 were revised up.
All this leaves a very close call as to whether the UK economy will see a recession during 2023 but it does mean that it won’t have started last year despite the negative growth recorded in Q3 (this was largely due to the extra bank holiday for the Queen’s funeral). The latest forecasts from our friends at Oxford Economics only has a fall in UK GDP in Q2-23, with a marginal increase in the quarters either side of that which means we won’t, technically, have a recession, but growth is likely to be pretty anemic for most of the year. You can hear more about this at our Spring Economic Update which will be held on 20th April – see https://www.mta.org.uk/event/mta-spring-economic-update-2023 for more details and to register (it is free for members to attend).
Perhaps more interestingly for us, there has been a significant upgrade of the data for manufacturing output which is now estimated to have grown in the final quarter of 2022 by +0.5% – this is revised up from a fall of -0.1%. This means that for the year as a whole, manufacturing output contracted by -3.7% (previous estimate -4.7%). There has also been an upward revision for the construction sector but no change for services. We need to wait for the detailed figures in a couple of weeks to see where these revisions came from but the ONS note that the major drivers of growth in Q4-2022 were the pharmaceutical and transport equipment (which includes both automotive and aerospace industries) groups with chemicals output seeing the largest reduction.
All this means that while the economy as a whole is estimated to be -0.6% smaller than before the Covid pandemic (for quarterly data this is taken to be Q4-2019) but the manufacturing sector is +3.6% larger – construction is also above its pre-pandemic level (+6.0%) but services are -1.1% below that point.
Finally in this section, the National Accounts brings revision to the data on investment although not yet the awaited industry level breakdown. Perhaps more importantly, there have been very significant revisions to the investment data which the ONS attributes to a combination of new data and a refresh of the seasonal adjustment parameters (the quarterly data is all seasonally adjusted). These revisions have seen a downgrading for Q4 but the trend is exacerbated because of upward revisions to the data for Q3 which suggests that the changes to seasonal adjustment have the largest impact in the revisions.
As a result, total business investment is now estimated to have fallen by -0.2% in the final quarter of 2022, significantly weaker than the +4.8% growth in the first release of the data. While this seems like bad news, the upgrade to Q3 means that full year trend is now estimated to be +10.8% compared to +9.9% in the previous data release.
Although we don’t have the industry breakdown, we do have the analysis by asset type and some notes from the ONS in their statistical bulletin. This highlights that these revisions to total business investment were concentrated in “other machinery” which in the published data is part of the “ICT & Other machinery” heading. The extent of these revisions is shown by the quarter-on-quarter trend for the end of 2022 being revised from its previous estimate of +11.9% to -8.2% in today’s figures. However, because this is at least in part due to an upward revision for Q3, the overall figure for 2022 is virtually unchanged at +17.7%.
You can download the ONS Statistical Bulletin for the National Accounts from their web-site at https://www.ons.gov.uk/releasecalendar (31 March) or request it from MTA.