United Kingdom: Economy expands on improving external demand
February 26, 2014
In the last quarter of 2013, GDP expanded a seasonally-adjusted 0.7% over the previous quarter according to more detailed figures released by the Office for National Statistics (ONS) on 26 February (Q3: +0.8% quarter-on-quarter). The reading was in line with both the preliminary estimate and market expectations. In annual terms, GDP grew 2.7%, which was up from the 1.9% expansion recorded in the third quarter. In the full year 2013, the economy expanded 1.9% which was an improvement over the 0.3% growth recorded in 2012.
According to revised figures, Q4's expansion came on the back of improving external demand, while domestic demand decelerated over the previous quarter. Private consumption rose a meagre 0.1% (Q3: +1.1% qoq) and government spending rose 0.3% (Q3: +0.6% qoq). Conversely, fixed investment accelerated from 1.7% growth in Q3 to a 2.4% increase in Q4.
On the external side of the economy, exports of goods and services rose 0.4% in the fourth quarter, which contrasted the 2.8% fall recorded in the third quarter. Meanwhile, imports fell 0.9%, which contrasted the 0.7% increase observed in the previous quarter. As a result, the external sector's net contribution to the overall economy rose from minus 1.1 percentage points in Q3 to plus 0.4 percentage points in Q4.
In the Bank of England's (BoE) February inflation report, it projects that the economy will grow 3.7% in 2014 and 2.7% in 2015. FocusEconomics Consensus Forecast panelists expect the economy to grow 2.6% in 2014, which is up 0.1 percentage points from the previous month's estimate. The panel sees growth accelerating to 2.3% in 2015.
Author: Dirina Mançellari, Senior Economist