UK economic growth rises on big manufacturing push

Following full year of decline in 2018, business investment recovered during quarter

Philip Hammond, UK chancellor of the exchequer, listens during a Bloomberg Television interview.

UK economic growth accelerated in the first quarter of this year, driven by the highest quarterly pick-up in manufacturing since the 1980s as the original Brexit deadline loomed.

Gross domestic product (GDP) growth rose to 0.5 per cent between January and March, according to the Office for National Statistics (ONS).

This compares to 0.2 per cent growth in the previous quarter, when car manufacturing declined at its steepest rate in just under a decade. In comparison with the same quarter a year ago, GDP was up 1.8 per cent.

Production output increased by 1.4 per cent during the quarter. This was boosted by a 2.2 per cent rise in manufacturing, the industry’s highest output since the third quarter of 1988.

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The ONS noted that many manufacturers had delivered orders early, indicating a rush of activity as companies cleared out the order books in advance of the March 29th Brexit deadline.

Pharmaceuticals in particular showed high activity, growing 9.4 per cent.

Inventories were also a contributing factor, as some businesses stockpiled parts due to concerns over supply disruption if the UK crashed out of the EU without a deal.

The rate at which inventories increased was the highest for any G7 country.

Meanwhile services output slowed to 0.3 per cent, despite strengthening retail sales.

The deceleration echoes the trend noted by the Markit UK Services Purchasing Manager’s Index (PMI) for March, when companies opted to delay spending due to the uncertainty over Brexit.

But there was a sharp pick-up in retail sales, up 1.6 per cent.

Construction output increased by 1 per cent, driven by a 2.9 per cent rise in repair and GDP maintenance work.

Output of the agriculture, forestry and fishing sector fell by 1.8 per cent, providing the only negative contribution to growth.

Following a full year of decline in 2018, business investment recovered to post a 0.5 per cent increase in the first quarter of 2019 as firms put more money into IT equipment and other machinery.

But the ONS warned that the figures could be revised, with some external evidence suggesting confidence remained weak during the period.

The Government’s consumption increased by 1.4 per cent, up slightly on 1.3 per cent in the final quarter of last year.

The ONS data dump also showed that the trade deficit widened to 3.4 per cent of nominal GDP in the quarter. – PA