ONS: Lowest quarterly growth in a year
Darren MorganDirector of Economic Statistics at Office of National Statistics (ONS)says:
“The UK economy has grown for the fourth straight quarter and is now well above pre-pandemic levels, despite growth over the last three months being the lowest in a year.
“This was due to growth in a number of service sectors as the economy continued to recover from the impact of Covid-19, including hospitality, transport, employment services and travel agencies. There was also strong growth in IT.”
“Our latest monthly estimates show that GDP (gross domestic product) fell slightly in March, with declines in both services and manufacturing.
“However, construction had a strong month, thanks in part to repair work following the February storms.”
Quarterly growth slowed to 0.8%
Overall, UK economic growth slowed to 0.8% in the first three months of 2022 as the economy slowed.
That’s slower than the 1.3% growth recorded from October to December, but it lifts quarterly GDP above its pre-crisis level.
It’s also slightly weaker than the 1% growth economists were expecting.
That could be the best quarterly growth we’ve seen this year as the cost of living crisis hits the economy.
Updated at 2:20 AM EDT
After the turnaround in March, the UK economy is just 1.2% above its pre-coronavirus pandemic level.
Services is now 1.5% above its pre-coronavirus level, while construction is 3.7% above and production is still 1.6% below – with factories struggling with supply chain disruptions and shortages of raw materials and parts.
GDP fell 0.1% in March and is now 1.2% above pre-pandemic levels:
▪️ Services down 0.2% (1.5% up)
▪️ Manufacturing down 0.2% (1.0% down)
▪️ Construction grew by 1.7% (3.7% above)
➡️ https://t.co/Mqngeuf4cb pic.twitter.com/dHSAxXCOfw
— Office for National Statistics (ONS) (@ONS) May 12, 2022
The UK services sector contracted 0.2% in March and was the main reason behind the 0.1% contraction in March GDP.
Production of consumer services fell by 1.8% after growing by 0.5% in February 2022.
Output also contracted by 0.2%, but construction activity rose by 1.7% (suggesting that construction activity was recovering after the February storm disruption).
The UK economy contracted 0.1% in March
Newsflash: UK economy contracted in March, with a GDP fall of 0.1%.
That’s slightly worse than the 0% growth forecast and will fuel fears that the economy is slowing.
The GDP report also shows that there was no growth in February.
February GDP revised down to 0% growth from +0.1% originally estimated.
Continue…
Deutsche Bank UK economist Sanjay Raja also predicts that the UK economy flattened in March and could contract in the current quarter (April-June).
Here is his take on the UK GDP report (to be released in about 10 minutes):
For the first quarter of 2022, we expect GDP growth of almost 1% compared to the previous quarter. Much of the surge in activity is likely to come from household consumption and private investment (including net acquisitions, housing investment and equities).
Looking ahead to Q2, we will be watching March’s GDP numbers closely for the carryover effect into the next quarter. On that front, we think monthly GDP has flattened and risks are biased to the downside. We continue to expect a slowdown in Q2, with the economy set to contract by 0.2% qoq – a call we’ve had for some time.
For 2022, we continue to see growth of 3.8%, although risks to our forecast are on the downside, with recession risks likely to remain elevated into Q2 2022.
Updated at 1:59 AM EDT
Introduction: UK GDP report for March and Q1
Good morning and welcome to our ongoing coverage of business, the global economy and financial markets.
A new health check for Britain today will show how the economy has slowed as the cost of living crisis hits families and threatens to plunge the country into recession.
The GDP report for the first quarter of 2022, due at 7 a.m., is expected to show that the economy grew a healthy-sounding 1% in the first quarter, compared to 1.3% in the final quarter of 2021.
However, most of that growth came in January, when activity picked up sharply after December’s Omicron disturbance.
Growth slowed to just 0.1% in February and some economists fear it may have stalled in March, with estimates of 0% growth in March alone.
Michael Hewson from CMC markets explained:
The services index is likely to account for the bulk of the expansion at 0.9% but if the Bank of England is to be believed this quarter could be as good as this year for the UK economy. Business investment is also expected to improve to 1.9% from 1% in the fourth quarter.
Looking at the monthly GDP numbers, we saw 0.8% growth in January and 0.1% growth in February. There could well be some contraction in March, although estimates are for flat at 0%, which is likely to still drag down quarterly numbers.
UK GDP report to February 2022
Also arrives today
European markets are expected to fall about 1%, erasing Wednesday’s rally, as fears of inflation and rising interest rates continue to hit stocks.
Wall Street had another turbulent session yesterday, finishing lower with technology stocks sliding further.
Higher-than-expected US inflation dampened hopes that the Federal Reserve could achieve a “soft landing” if it hikes interest rates, with CPI slipping just 8.3% in April.
He is Chen from IG explained:
Inflation in the United States rose more slowly in April, but impatient traders were not happy with the pace.
The US CPI released last night was still stronger than forecast at 8.3% vs. 8/2% y/y, suggesting that price pressures will continue at higher levels for longer, even if they already have theirs has reached its peak.
The Australian stock market is trading at an intraday low with the #ASX200 down 103 points or 1.5% to 6960. The index is down ~8.7% from its peak in April. Rising inflation, higher interest rates and lockdowns in China are keeping markets under pressure.
— CommSec (@CommSec) May 12, 2022
That sell-off has resulted in Apple losing its title as the world’s most valuable company to energy giant Saudi Aramco, which was boosted by higher oil prices.
On the corporate front BT, Rolls-Royces, Balfour Beatty and Super dry report results.
The agenda
- 7am BST: UK GDP and trade reports for Q1 2022 and March
- 9am BST: IEA Monthly Oil Market Report
- 9.30am BST: Latest ONS economic activity survey
- 1.30pm BST: US PPI Producer Price Inflation Survey
- 1.30pm BST: Weekly US Unemployment Report
Updated at 1:47 AM EDT
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