With the publication of the UK National Accounts for the 1st quarter, the Office for National Statistics (ONS) revised up the estimate for growth in the economy to +0.7%; however, given the falls in GDP in both the 3rd and 4th quarters of 2023 and a flat trend in the previous quarter, the annualized rate of growth is just +0.3%.
Within this relatively small adjustment to the GDP data, growth in output for the manufacturing sector has been revised down to +1.1% from the first estimate of +1.4%; the construction sector, while still showing a fall in activity, has been revised in the opposite direction from -0.9% in the first release to -0.6% in the national accounts and growth in the service sector has been edged up to +0.8% (from +0.7%). The revisions for the manufacturing sector came as a result of late and updated data, mainly affecting the transport equipment industries (automotive, aerospace, etc.).
There are corresponding adjustments to the annualized rates of growth which now stand at +1.7% for manufacturing, -0.4% for construction and +0.4% for services. We will get the details of these revisions for the manufacturing sector when the May output data is published on July 11th.
Looking forward into the 2nd quarter, the UK economy was flat in April and June is likely to be a weak month given the junior doctors strike last week which will have affected “output” of the health sector.
The ONS also reported comparisons with the other G7 group of countries; this shows that although the UK had the fastest growth in the 1st quarter of 2024, we had the 2nd weakest economy in 2023; our growth of just +0.1% for the year was only ahead of Germany where the economy contracted by -0.2%.
You can download the ONS Statistical Bulletin for the National Accounts from their website at https://www.ons.gov.uk/releasecalendar (28 June) or request it from MTA.
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Business Investment: The publication of the Quarterly National Accounts also brings us an update of the data on investment, including a breakdown by industry sector and group. It is worth noting that negative comparisons with the 1st quarter of 2023 are probably because that was when the super-deduction allowance scheme ended and created a mini spike in capital expenditure.
Total business investment is now estimated to have grown by +0.5% compared to the 4th quarter of 2023 but to be -1.0% lower than a year earlier in the 1st period of 2023. The rolling 4-quarter totals show total business investment is +2.6% higher in the latest 4 quarters than in the previous equivalent period.
Looking at the asset type detail, there is a different picture for spending on “ICT & Other Machinery”; this had quarter-on-quarter growth of +3.2% but was -0.3% lower than in Q1-23, while the rolling 4-quarter trend is very similar to that for total business investment at +2.5%.
Turning to the breakdown by industry sector, total manufacturing investment fell by -0.7% when comparing Q1-24 with Q4-23 but, perhaps slightly surprisingly, it was +2.0% higher than a year earlier (Q1-23). The rolling 4-quarter trend showed growth of +3.2%, despite the period of the super-deduction allowance falling entirely below the line in the comparison.
The sub-group of the Engineering & Vehicles industries saw capital expenditure rise by +1.6% compared to Q4-23 and by +0.7% against Q1-23, but the 4-quarter rolling trend showed a fall of -2.5%. the latter is because, oddly, this group saw investment fall at the end of the super-deduction scheme in Q1-23, although this may get revised in future data releases.
In the 1st quarter of 2024, the manufacturing sector accounted for 14.3% of total business investment; in turn, the Engineering & Vehicles industries accounted for 42.8% of manufacturing investment in the latest period.
You can download the ONS Statistical Bulletin for Business Investment from their website at https://www.ons.gov.uk/releasecalendar (28 June) or request it from MTA.