Commentary Directory
- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Choppy GDP Means UK Should Avoid Q1 Recession
Jacob Hess
April 13, 2023
- UK
- GDP
To say UK GDP has been choppy in the last year is an understatement. Today we got a look at another month of growth, and it continues to paint a mixed picture. UK GDP is estimated to have been flat (0.0% MoM) in February, after growth of 0.4% MoM in January (which was revised up from 0.3% MoM). For the three months leading up to February, GDP grew only 0.1% since it includes the weak -0.5% MoM growth in December 2022. In February, the construction sector lead the way with strong growth of 2.4% MoM after a notably weak January (-1.7% MoM). The increase was driven by a jump in repair & maintenance work of 4.5% MoM and a smaller increase in new work of 1.1% MoM. The ONS points out that favorable weather helped to boost the former as it allowed firms to get more work down. Thus, the bump might be temporary, and we might get some sort of a reversal in March.

Outside of construction, the services and production sectors both contributed negatively to overall GDP but at small magnitudes. The production sector contracted -0.2% MoM after a -0.5% MoM decline in January. Manufacturing, specifically, was unchanged as there were a mix of subsectors that gained and lost. Contributing positively were electronics and transport equipment production which were offset by declines in electrical equipment and chemical production. In the end, the production sector made a minuscule -0.03 ppt contribution to topline GDP. The services sector also contracted, down -0.1% MoM after a strong 0.7% MoM growth in January. Like production, there was a mix in the performance of subsectors with the contracting subsectors offsetting those that grew. Of note was a decline in education, down -1.7% MoM, as some teachers went on strike. Additionally, this followed growth of 2.5% MoM in January, so there was a bit of a bounce back there. Services ended up being the worst performing sector of the three, contributing -0.11 ppts to topline GDP.
There have been suggestions that the UK would fall into recession in Q1 2023, but so far, it looks like that might be avoided. A strong January has bolstered growth in the first quarter and good weather seems to have provided support for economic activity in February. Strength in these two months sets us up for disappointment in March but there is a lot of room on the downside before the whole first quarter will turn negative. Remember, December growth was -0.5% MoM, and quarterly growth through February was still up 0.1% MoM. However, early signals of March activity have been a bit disappointing. The UK Manufacturing PMI fell to 47.9 in March (down from 49.3) meaning a deeper contraction likely occurred there, and the Construction PMI’s growth of 54.6 in February was neutralized to just 50.7. The only source of growth will be the services sector which maintained a moderate expansion per last month’s PMI. There is also an improvement to come in education once teacher strikes are quelled. Once you put all the pieces together, it looks very likely that the UK’s GDP will shrink in March, but it is unclear whether or not it will be enough to make quarterly growth negative.