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GDP Expands +0.1% in Q1, Despite March Services Slump

UK DATA
MNI (London)
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The UK economy contracted in March, whilst managing to expand by +0.1% q/q as anticipated in Q1. Monthly GDP contracted by -0.3% m/m, against expectations of stalling.
  • Wet weather likely dampened spending appetite in March, with the services sector the main contributor to the fall in GDP, posting a -0.5% m/m decline. This was driven by wholesale and retail trade, with car sales falling below pre-pandemic levels. Production saw the strongest growth since May 2021, boosted by pharmaceuticals.
  • Despite the March slump, UK GDP rose by +0.1% q/q in Q1, in line with consensus expectations and holding pace with Q4 2022. Over the quarter, services expanded by +0.1% q/q, driven by increases in information, communication and admin support services. Construction expanded by +0.7% q/q and production by +0.1% q/q, with +0.5% q/q growth in manufacturing.
  • Household consumption stalled on the quarter, as high inflation continued to weaken spending appetite.
  • This data follow's yesterday's BOE meet where the Bank's latest growth forecasts saw a marked upgrade and a recession no longer in sight. Lower energy prices, fiscal stimulus and recovering confidence underscored a markedly less-weak outlook, however in aggregate the growth picture looks relatively stagnant.
  • The BOE projects overall underlying output to be positive at +0.2% in Q1 and Q2 (when excluding bank holidays and strikes), whilst headline 2023 Q2 GDP was upgraded to flatline at 0% (vs -0.7% in Feb).

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The UK economy contracted in March, whilst managing to expand by +0.1% q/q as anticipated in Q1. Monthly GDP contracted by -0.3% m/m, against expectations of stalling.
  • Wet weather likely dampened spending appetite in March, with the services sector the main contributor to the fall in GDP, posting a -0.5% m/m decline. This was driven by wholesale and retail trade, with car sales falling below pre-pandemic levels. Production saw the strongest growth since May 2021, boosted by pharmaceuticals.
  • Despite the March slump, UK GDP rose by +0.1% q/q in Q1, in line with consensus expectations and holding pace with Q4 2022. Over the quarter, services expanded by +0.1% q/q, driven by increases in information, communication and admin support services. Construction expanded by +0.7% q/q and production by +0.1% q/q, with +0.5% q/q growth in manufacturing.
  • Household consumption stalled on the quarter, as high inflation continued to weaken spending appetite.
  • This data follow's yesterday's BOE meet where the Bank's latest growth forecasts saw a marked upgrade and a recession no longer in sight. Lower energy prices, fiscal stimulus and recovering confidence underscored a markedly less-weak outlook, however in aggregate the growth picture looks relatively stagnant.
  • The BOE projects overall underlying output to be positive at +0.2% in Q1 and Q2 (when excluding bank holidays and strikes), whilst headline 2023 Q2 GDP was upgraded to flatline at 0% (vs -0.7% in Feb).