MNI DATA ANALYSIS: Q2 GDP +0.4% Despite Business Invest Fall>

-UK Q2 Business Investment -0.7% q/q vs +0.5% Previous Estimate

-UK Q2 Current Account Gap Stg20.317bn vs Stg15.692 Q1

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - UK economic growth accelerated at a modest pace in 

the second quarter, despite a dramatic downward revision to business 

investment, but growth over the first quarter was downgraded to its 

lowest pace since the first quarter of 2012. 

     Gross domestic product expanded by 0.4% in the second quarter, 

matching the MNI median forecast, unchanged from the outturn reported in 

August. 

     On an annual basis, output rose by 1.2%, down from the MNI median 

forecast of 1.3% and the previously reported outturn. 

     The unchanged quarterly growth pace comes despite a dramatic 

downward revision to business investment, which slumped by 0.7% in the 

second three months of the year, after a 0.5% fall in the first quarter, 

shaving 0.1 percentage points from growth. Business investment was 

reported to have grown by 0.5% in the first calculation of gross 

domestic product. 

     Over the first quarter of 2018, growth was revised to just 0.1% 

from the previously-reported rate of 0.2%. However the economy appears 

to have perked up in recent months, with GDP rising by 0.6% in the three 

months to July, according to data released earlier this month, the 

fastest pace since the three months to August of 2017. 

     Meanwhile, the current account deficit widened significantly in the 

second three months of the year, to Stg20.317 billion, compared to the 

MNI median forecast of Stg18.9 billion, from Stg15.692 in the first 

three months of 2018. 

     That took the shortfall to 3.9% of GDP, up from 3.0% in the first 

quarter, the largest ratio since the second quarter of 2017. 

     Consumer spending, which comprises just under two-thirds of GDP, 

grew more quickly than initially reported, with household consumption 

rising by 0.4% in the second quarter, above the previously-reported 0.3% 

gain, accounting for 0.2 percentage points of total growth. 

     Despite the pickup in spending, the savings ratio rose modestly to 

3.9% in the second quarter, above a downwardly-revised 3.6% in the 

previous three months. On the non-financial account, which includes 

outlays for large capital transactions, net borrowing fell slightly to 

Stg7.224 billion from Stg7.770 billion in the first quarter. Despite the 

slight fall, households have borrowed for the seventh straight quarter, 

the longest stretch since records began in 1987. 

     Over the second quarter of 2018, external trade exerted less of a 

drag on growth than reported a month ago. Exports slipped by 2.2% over 

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

trade shaved 0.6 percentage points from total growth, after subtracting 

0.8 percentage points in the first published estimate of GDP. 

     Government spending rose by declined by 0.4%, down from the 

originally-reported 0.4% gain, subtracting 0.1 percentage points to 

total growth. 

     Growth in the output components to GDP were revised slightly. 

     The dominant service sector expanded by at 0.6% in the second 

quarter, up from the 0.5% gain estimated last month, contributing 0.5 

percentage points to total growth. Services account for 79.6% of the 

economy. 

     Industrial output slumped by 0.8% in the second quarter, unchanged 

from the previously-reported loss, subtracting 0.1 percentage points 

from total growth.  Production accounts for 13.8% of total GDP. 

     Manufacturing output accounted for much of the industrial weakness, 

contracting by 0.7%, slightly better than the initially-reported 0.9% 

fall.  

     That's the second straight quarterly fall in the manufacturing 

sector, the longest stretch since the six months ending in the first 

quarter of 2016, leaving the sector in technical recession. 

Manufacturing, which accounts for 10.0% of total output, shaved 0.1 

percentage points from GDP. 

     The construction sector rose by 0.8%, a shade below the 0.9% gain 

reported a month ago, adding 0.1 percentage points to total growth.  

Construction accounts for 6.0% of total output. 

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

[TOPICS: M$B$$$,MABDS$]