UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.5% in Quarter 1 (Jan to Mar) 2019, having slowed to 0.2% growth in the previous quarter.
In comparison with the same quarter a year ago UK GDP increased by 1.8% to Quarter 1 (Jan to Mar) 2019; up from 1.4% in the previous period.
Growth in the services sector slowed to 0.3% in the latest quarter, while there was a noticeable pickup in growth in the production sector, driven by growth of 2.2% in manufacturing output.
Private consumption, government consumption and gross capital formation contributed positively, while net trade contributed negatively to GDP growth.
The trade deficit widened to 3.4% of nominal GDP in Quarter 1 2019; when unspecified goods are excluded, the deficit widened to 2.3% of nominal GDP – this figure gives a better indication of the underlying trade position.
Gross fixed capital formation increased by 2.1% in the latest quarter, with strong growth in government investment; business investment increased by 0.5% in Quarter 1 2019 following four quarters of contraction.
Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP; the output approach, the expenditure approach and the income approach. Further information on all three approaches to measuring GDP can be found in the short guide to national accounts (PDF, 317KB).
Data in chained volume measures within this bulletin have had the effect of price changes removed (in other words, the data are deflated), with the exception of income data, which are only available in current prices.
International Financial Reporting Standards (IFRS16)
In January 2019, a new reporting standard took effect for those businesses using accountancy framework International Financial Reporting Standards (IFRS). IFRS16 Leases brings the reporting of operating leases onto balance sheets. This has impacted how some businesses have reported on their fixed assets, mainly through our Quarterly Acquisition and Disposal of Capital Assets Survey (QCAS), used in the compilation of gross fixed capital formation (GFCF) and business investment.
While we recognise there is a change to the accounting standards for some businesses this quarter, there has been no change to national accounts standards on the treatment of leases. To assess the impact of IFRS16’s introduction on GFCF and business investment estimates, we contacted around 260 QCAS respondents with large movements in their data to ask them which accountancy framework they used and what if any impact IFRS16 has had on their data for Quarter 1 2019, if they use the IFRS framework. As a result, we have made an adjustment of approximately £220 million to remove the quantified impact of its introduction and better reflect underlying growth for GFCF and business investment. The asset most affected by the introduction of IFRS16 in this provisional dataset was ICT equipment and other machinery and equipment.Nôl i'r tabl cynnwys
UK gross domestic product (GDP) is estimated to have grown by 0.5% in Quarter 1 (Jan to Mar) 2019, having slowed to 0.2% growth in the previous quarter. This is in line with the latest expectations from the Bank of England and slightly above those from the National Institute of Economic and Social Research. The UK economy grew by 1.8% compared with the same quarter in the previous year (Figure 1), its fastest rate since Quarter 3 (July to Sept) 2017.
The strength in quarterly growth is in part due to the low December 2018 monthly growth in the base period, which makes the current period look stronger in comparison. Having fallen by 0.3% in December 2018, there was offsetting strength in January 2019 as output increased by 0.5%, followed by a further increase of 0.2% in February 2019. Real GDP growth is estimated to have contracted by 0.1% in March 2019. More information on the monthly path of GDP can be found in the GDP monthly estimate, UK: March 2019 release.
Nominal GDP increased by 1.0% in Quarter 1 2019, up from the 0.7% recorded in the previous quarter, while real GDP per head increased by 0.4% in the first quarter of 2019 (Table 1). The implied GDP deflator represents the broadest measure of inflation in the domestic economy. It reflects changes in the price of all goods and services that comprise GDP, including the price movements in private and government consumption, investment and the relative price of exports and imports.
In the year to Quarter 1 2019, the GDP deflator increased by 1.6%, continuing the easing that has been seen in recent quarters. This movement in the implied deflator broadly reflects weakness in the implied import deflator for goods, which has been driven by falls in the price of fuel imports – including gas and electricity and crude and refined oil – due to a fall in oil prices in Quarter 1 2019.
There has also been a notable decline in the implied deflator for gross capital formation in Quarter 1 2019, although this broadly reflects erratic movements in non-monetary gold. This has been partially offset by an increase in the implied deflator for government consumption, as education spending continues to rise.
|Chained volume measures||Current market prices|
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Growth in the output measure of gross domestic product (GDP) increased by 0.5% in Quarter 1 (Jan to Mar) 2019 (Figure 2). Production output increased by 1.4% in the first quarter of 2019, within which manufacturing output increased by 2.2%. Services output growth slowed to 0.3% in Quarter 1 2019, while construction output increased by 1.0%. Output of the agriculture, forestry and fishing sector fell by 1.8%, providing the only negative contribution to growth.
Services output increased by 0.3% in Quarter 1 2019, following the comparatively strong performance in the second half of 2018 (Figure 3). This easing has also been seen in the recent Markit UK Services Purchasing Manager’s Index (PMI) for March 2019, which recorded a contraction in services sector activity for the first time since 2012 and cited how “corporate clients had opted to delay spending in response to political uncertainty”.
Following growth of 0.3% in Quarter 4 (Oct to Dec) 2018, there was a sharp pickup in the output of the wholesale, retail and motor trades industries, which increased by 1.2% in the first quarter of 2019. This increase broadly reflects growth in retail sales, which increased by 1.6% in the first three months of 2019.
As outlined in the Retail sales, Great Britain: March 2019 publication, the growth in Quarter 1 2019 reflects an increase in the quantity bought across all stores, with the exception of department stores and household goods stores. However, the pickup in retail sales in Quarter 1 2019 is at odds with a variety of external survey evidence, including both the British Retail Consortium and Bank of England’s Agents’ Summary Survey, with the latter attributing the weakening demand for household goods to the relatively subdued UK housing market, in addition to the recent political uncertainty.
Professional, scientific and technical activities fell by 0.6% in Quarter 1 2019. However, this decrease broadly reflects a fallback following particularly strong growth throughout the second half of 2018. In addition, financial and insurance services output continued to fall in Quarter 1 2019, decreasing by 0.4%. The quarterly fall predominantly reflected a fall in financial service activities, which has not contributed positively to growth since Quarter 1 2017. It should be noted that data content in these industries is comparatively low in early estimates. This fall is also consistent with the Bank of England’s Agents’ Summary Survey, which attributed some of the recent decline in financial services to weaker demand, reflecting recent political uncertainty as well as worries around trade tensions between the US and China.
Following a weak picture in Quarter 4 2018, in which all of the four main areas of production experienced a fall in output, there was a pickup in Quarter 1 2019. Production output increased by 1.4% (Figure 4), predominantly driven by manufacturing output, which increased by 2.2%, its fastest rate since Quarter 3 (July to Sept) 1988.
This pickup in manufacturing was also captured in the recent Markit UK Manufacturing PMI for March 2019, which recorded a 13-month high in manufacturing activity due to “companies stepping up production to build-up inventories in advance of Brexit and to also meet rising inflows of new work”. The rate at which inventories increased was the highest for any G7 country.
Recently, there has been much interest in the extent to which stock building has been taking place in the UK. This refers to when a business increases its holdings of intermediate and/or finished goods, which is typically in response to unexpected shocks to demand. There have been concerns that there may be disruptions at the UK border, and there has been external survey evidence that points to a sharp uptick in businesses increasing their inventories of stocks.
For instance, the latest Bank of England’s Agents’ Summary shows that “around half of all respondents had been building inventories as part of their contingency planning for Brexit”, while almost one-third of respondents to the latest Decision Maker’s Panel Survey reported an increase in stock levels. It is difficult to unpick how much of the increase in manufacturing output in Quarter 1 2019 might reflect the increase of domestic output produced by UK manufacturers in response to the stockpiling demands by UK and/or foreign manufacturers.
There has been widespread strength across the majority of manufacturing industries in Quarter 1 2019 (Figure 5), with the most notable growth occurring in the relatively volatile pharmaceuticals sector which increased by 9.4% in the first quarter. This was mainly driven by growth in exports of pharmaceutical products, some of which was likely in anticipation of the UK’s original exit date from the European Union at the end of March 2019.
The manufacturing of food and drink recovered from a fall in Quarter 4 2018, driven by an increase in the manufacturing of alcohol products, reflecting strong export demand. The manufacture of transport equipment also recovered somewhat from a fall in the final quarter of 2018, increasing by 0.9%. The Quarter 1 growth in this sector has been driven by increases in the manufacturing of aircraft and other transport equipment.
Mining and quarrying production also bounced back in Quarter 1 2019, increasing by 2.0% following a fall in the previous quarter. This increase stems predominantly from relatively new oil fields maturing in production capacity, which has led to an increase in output in the first three months of 2019.
In contrast, electricity, gas, steam and air as well as water supply and sewerage production both fell for the second consecutive quarter in Quarter 1 2019. Warmer than average temperatures in Quarter 1 2019 lowered the demand for electricity production, while the 1.6% fall in water supply and sewerage reflected broad-based weakness across the sector in Quarter 1 2019. More information on the movements in the output production industries can be found in the Index of Production, UK: March 2019 release.
Following a weak end to 2018, construction output recovered in the first quarter of 2019, increasing by 1.0%. However, this reflects to some extent the volatile monthly movements in recent months. Following a fall of 2.5% in December 2018, construction output recovered in January and February 2019, with growth of 3.3% and 0.5% respectively. The latest figures show that construction output fell by 1.9% in March 2019 (Figure 6).
The quarterly increase in total construction output in Quarter 1 2019 resulted from the 2.9% growth in repair and maintenance work, which also recovered following a weak end to 2018. Elsewhere, growth in new construction work was flat in Quarter 1 2019, with falls in new commercial construction work offset by an increase in infrastructure output. The latest Bank of England’s Agents’ Summary Survey notes how “heightened caution around business investment has resulted in some commercial developments being paused or delayed”.Nôl i'r tabl cynnwys
The expenditure measure of gross domestic product (GDP) increased by 0.5% in Quarter 1 (Jan to Mar) 2019. Private consumption, government consumption and gross capital formation (GCF) contributed positively to growth, while net trade subtracted from GDP growth in Quarter 1 2019 (Figure 7).
There have been some notable movements in imports of unspecified goods in the first quarter of 2019. These unspecified goods include non-monetary gold (NMG) and account for the large and offsetting impacts to gross capital formation and net trade. These movements do not affect headline GDP as they are recorded as equivalent offsetting impacts in the UK National Accounts, but this is reflected in the composition of GDP growth. More information on how non-monetary gold (NMG) features in GDP is available. There has been a sizeable import of NMG in Quarter 1 2019, reflected in a record high in the acquisition less disposal of valuables.
Following a relatively subdued 2018, household consumption increased by 0.7% in the first three months of 2019. Although when compared with the same quarter a year ago, growth remained subdued at 1.9%. External evidence points towards continued weakness in consumer demand. The latest Bank of England Agents’ Summary of Business Conditions states that “uncertainty about Brexit and the wider economy weighed on spending” in Quarter 1 2019, while the GfK Consumer Confidence index remained unchanged at negative 13 in March 2019, below its long-run average.
Government consumption increased by 1.4% in Quarter 1 2019, following growth of 1.3% in Quarter 4 (Oct to Dec) 2018. This increase reflects widespread growth in a number of areas including health, which increased by 0.7%, and other functions of central government, such as general public services and economic affairs, which increased by 9.6%.
Gross fixed capital formation (GFCF) increased by 2.1% in the first three months of 2019, mainly reflecting the 8.1% increase in general government investment. This was due to increases across a number of central government departments.
Government consumption and investment figures are based on the latest available budgetary information, provided by government departments including HM Treasury and local government. These estimates will be subject to further scrutiny when outturn information are available.
Following four consecutive quarters of decline throughout 2018, business investment grew by 0.5% in the first quarter of 2019, driven by higher investment in IT equipment and other machinery and equipment. These figures should be interpreted with some caution as early estimates of business investment can be prone to revision. External evidence suggests that investment intentions remained weak in Quarter 1 2019.
The latest Bank of England Agents’ Summary of Business Conditions reported that investment intentions fell sharply in manufacturing, with a modest decline in services. Political uncertainty continues to be cited as having a negative impact on investment, as seen in the Quarter 1 2019 Decision Maker’s Panel, while the latest Deloitte Chief Financial Officers (CFO) Survey states that “more than half of CFOs continue to rate current levels of uncertainty as high or very high”.
It should be noted that GFCF and business investment estimates are subject to higher levels of uncertainty in this release, reflecting the introduction of International Financial Reporting Standard (IFRS) 16 Leases in January 2019 – further information can be found in the Things you need to know about this release section.
Alignment adjustments and balancing adjustments are typically applied to the inventories component to help balance the different approaches to GDP – more detail on these can be found in the Quality and methodology section of this publication. When these adjustments are removed, the underlying data show a substantial increase of £5.2 billion in stocks being held by UK companies in the most recent quarter (Table 2). Data for previous periods are available.
|Change in inventories |
|Chained volume measure||4600||-641||0||5241|
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The UK trade deficit widened to 3.4% of nominal GDP in Quarter 1 2019, the widest deficit in more than 50 years. This is largely a reflection of the volume of imports of unspecified goods, which includes non-monetary gold (NMG).
Figure 8 shows that excluding unspecified goods, the trade deficit was at 2.3% of nominal GDP in Quarter 1 2019. Export volume growth was flat, while import volumes increased by 6.8%, resulting in net trade being a significant drag on GDP growth in the first quarter of the year.
Trade in goods exports grew by 4.5% in Quarter 1 2019, reflecting increases in machinery and transport equipment and miscellaneous manufactures, while trade in services exports fell by an offsetting 5.0% due to falls in telecommunications, computer and information technology, intellectual property and other business services. The rise in imports reflects a 11.0% increase in trade in goods imports, partially offset by a 4.4% fall in trade in services imports.
More detail on the movements in trade data can be found in the UK trade: March 2019 release.Nôl i'r tabl cynnwys
Growth in nominal gross domestic product (GDP) strengthened in Quarter 1 (Jan to Mar) 2019, rising by 1.0% and following an increase of 0.7% in the previous quarter. This was driven by an increase of 2.5% in gross operating surplus (GOS) of corporations and a 0.9% increase in compensation of employees (CoE) (Figure 9).
Wages and salaries grew by 0.8%, due primarily to an increase in private sector salaries, while employer social contributions grew by 1.2%, due to increased National Insurance contributions. Other income increased by 1.1%, slowing slightly from growth of 1.4% in both the final two quarters of 2018 (July to December).Nôl i'r tabl cynnwys
Blue Book 2019
An article announcing the scope of Blue Book 2019 was published in October 2018. The Blue Book 2019 will include the biggest changes to the compilation of real (adjusted for price changes) gross domestic product (GDP) in a generation. We plan to publish indicative estimates of these changes on GDP in June 2019.
Revisions in June Quarterly National Accounts
In a change to our published revisions policy, the June Quarterly National Accounts (QNA) release will be open for revisions in Quarter 1 (January to March) 2019 only.Nôl i'r tabl cynnwys
The Gross domestic product (GDP) Quality and Methodology Information report contains important information on:
- the strengths and limitations of the data and how it compares with related data
- uses and users of the data
- how the output was created
- the quality of the output including the accuracy of the data
The national accounts are drawn together using data from many different sources. This ensures that the national accounts are comprehensive and provide different perspectives on the economy, for example, sales by retailers and purchases by households.
Important quality issues
There are common pitfalls in interpreting data series and these include:
- expectations of accuracy and reliability in early estimates are often too high
- revisions are an inevitable consequence of the trade-off between timeliness and accuracy
- early estimates are based on incomplete data
Very few statistical revisions arise as a result of “errors” in the popular sense of the word. All estimates, by definition, are subject to statistical “error”.
Many different approaches can be used to summarise revisions; the “Validation and quality assurance” section in the Quality and Methodology Information report analyses the mean average revision and the mean absolute revision for GDP estimates over data publication iterations.
Reaching the GDP balance
The different data content and quality of the three approaches – the output approach, the expenditure approach and the income approach – dictates the approach taken in balancing quarterly data. In the UK, there are more data available on output in the short-term than in either of the other two approaches. However, to obtain the best estimate of GDP (the published figure), the estimates from all three approaches are balanced to produce an average, except in the latest two quarters where the output data takes the lead due to its larger data content.
Information on the methods we use for Balancing the output, income and expenditure approaches to measuring GDP is available. The size and direction of the quarterly alignment adjustments, when considered alongside the statistical discrepancy, in Quarter 1 (Jan to Mar) 2019 indicate that in this quarter the levels of expenditure and income are lower than the level of output.
Alignment adjustments, found in Table M of the first quarterly estimate of GDP datasets in this release, have a target limit of plus or minus £2,000 million on any quarter. To achieve a balanced GDP dataset through alignment, balancing adjustments are applied to the components of GDP where required. They are applied to the individual components where data content is particularly weak in a given quarter due to a higher level of forecast content. The balancing adjustments applied in this quarter are shown in Table 3, the resulting series should be considered accordingly.
|GDP measurement approach|
and component adjustment applied to
|Change in inventories||Current prices||-2500|
|Gross Fixed Capital Formation||Current prices||-500|
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