MNI DATA ANALYSIS: Q1 GDP Revised Up; Construction Stronger>

-UK Q1 GDP +0.2% q/q vs +0.1% q/q previous 

-UK Q1 Business Investment -0.4% q/q vs -0.2% in previous estimate

-UK Q1 Current Account Deficit to Stg17.720bn from Stg19.537bn Q4

-UK Q1 Savings Ratio down to 4.1% from 4.5% in Q4

    By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - UK growth was revised higher in the first quarter, 

with the downturn in the construction sector less severe than originally 

reported, but business investment was revised lower. 

     Gross domestic product expanded by 0.2% in the first quarter, 

outpacing the MNI median forecast of a 0.1% rise, up from the 0.1% gain 

reported last month. 

     On an annual basis, output rose by 1.2%, in line with the MNI 

median forecast, matching the 1.2% gain reported in the second estimate 

of GDP. 

     Over 2017, the economy expanded by 1.7%, down from the 1.8% growth 

reported a month ago, the slowest calendar-year growth since 2012. 

     Meanwhile, the current account deficit narrowed in the opening 

months of 2017, falling to Stg17.720 billion, in line with the MNI 

median forecast of Stg17.7 billion, from Stg19.537 in the final three 

months of 2017. [Q4 previously reported as Stg18.443 billion, 3.6% of 

GDP] 

     That took the shortfall to 3.4% of GDP, the lowest ratio since the 

first quarter of 2017, down from 3.8% in the fourth quarter. 

     A less severe downturn in construction spending accounted for the 

bulk of the upward revision, with the sector contracting by just 0.8% in 

the first quarter, a better showing than the 2.7% slump reported a month 

ago. Construction shaved 0.05 percentage points from total growth, down 

from the originally-reported 0.2 percentage points.  

     A slowdown in consumer spending, which comprises just under 

two-thirds of GDP, accounted for much of the underlying slowdown from 

0.4% growth pace of the previous quarter. 

     Household consumption increased by just 0.2% in the first quarter, 

in line with the previous estimate, down from growth of 0.3% in the 

final three months of 2017, accounting for 0.2 percentage points of 

total growth. 

     The households' savings ratio fell to 4.1% in Q1, the lowest 

proportion since the first quarter of 2017, down from 4.5% in the fourth 

quarter.  

     However, on the non-financial account, which includes outlays for 

large capital transactions, net borrowing increased to Stg5.765 billion 

from Stg4.800 billion in the fourth quarter.  That's the sixth straight 

quarter of net household borrowing, the longest stretch since records 

began in 1987. 

     Business investment declined by more than initially estimated, 

countering unexpected resilience in the immediate aftermath of the 

Brexit vote. Investment slipped by 0.4% in the first quarter, the 

largest decline since the fourth quarter of 2016, down from the 0.2% 

fall reported last month, exerting a neutral effect total growth. On an 

annual basis, business investment increased by 2.0% in the first 

quarter, matching the outturn reported last month. 

     Over the first quarter of 2018, external trade provided a slight 

boost to GDP, better than reported a month ago. Exports were flat over 

the first quarter, while imports fell by 0.2%. As a result, net trade 

added 0.1 percentage points to total growth, after exerting a neutral 

effect in the GDP estimate reported last month. 

     Government spending rose by 0.4%, down from the originally-reported 

0.5 percentage point gain, adding 0.1 percentage points to total growth. 

     The dominant service sector growth expanded by at 0.3% in the first 

quarter, matching gain estimated last month, contributing 0.23 

percentage points to total growth. 

     In the month of April, service output expanded by 0.3% over March 

and by 1.6% over the same month of 2017, according to a separate report 

released on Friday. 

     Industrial output expanded by 0.4% in the first quarter, unchanged 

from the previously-reported 0.6% gain, adding 0.06 percentage points to 

total growth. 

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com