United Kingdom: First quarter GDP contraction worse than previously estimated
May 30, 2012
In the first quarter, GDP contracted a seasonally adjusted 0.3% over the previous quarter, according to the second estimate released by the Office for National Statistics (ONS) on 24 May. The figure was revised down a notch from the preliminary estimate of a 0.2% decline released on 25 April and thus mirrored the drop recorded in the preceding quarter. Compared to the same period last year, the economy posted a 0.1% contraction, which contrasted the 0.5% rise recorded in the final quarter of 2011. The quarterly decline was the result of a deterioration in both the domestic and external sectors. Gross fixed capital formation remained in negative territory by posting a 0.3% contraction (Q4 2011: -0.6% quarter-on-quarter). Moreover, a decline in inventories represented a further drag on first quarter growth. Moreover, private consumption moderated to a paltry 0.1% increase (Q4 2011: +0.4% qoq) which, nevertheless, was offset by a surprising 1.6% expansion in government spending, which represents its fastest pace of expansion in four years. Exports grew only 0.1% over the previous quarter, which came in well below the 1.6% expansion seen in Q4 2011. Imports followed suit and moderated to a 0.4% rise, which was down from the 0.9% increase recorded in the preceding quarter. As a result, the external sector's net contribution to overall growth swung from plus 0.2 percentage points in the fourth quarter to minus 0.1 percentage points in the first. Based on figures from its latest inflation report from May, the Bank of England projects the economy to grow 0.6% this year and 2.1% in 2013.