MNI DATA ANALYSIS: Q4 GDP Confirmed At +0.4%; C/A Gap Falls>

-UK Q4 Current Account Deficit Stg18.4 billion from Stg19.2 billion 

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - UK growth slowed in the fourth quarter, confirming 

an earlier estimate of gross domestic product, despite a downward 

revision to service sector output, even as the current account deficit 

fell sharply. 

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

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

month ago, below the 0.5% expansion recorded in the third quarter. 

     On an annual basis, output rose by 1.4%, in line with the MNI 

median forecast, matching the 1.4% gain reported in the second estimate 

of GDP. 

     Over the 2017, the economy expanded by 1.8%, up from the 1.7% 

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

2012. 

     Meanwhile, the current account deficit fell sharply in the closing 

months of 2017, narrowing to Stg18.443 billion, compared to the MNI 

median forecast of Stg24.4 billion. However, third quarter deficit was 

revised sharply lower, to Stg19.173 billion from the originally-reported 

Stg22.8 billion, the result of an increase in foreign credits and a fall 

in foreign debits. 

     That took the shortfall to 3.6% of GDP, the lowest since the second 

quarter of 2012, down from 3.7% in the third quarter. The deficit was 

originally reported as 4.5% of GDP in the third quarter. 

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

accounted for much of approximately half of the underlying growth. 

Household consumption increased by 0.3% in the fourth quarter, matching 

the previously-reported 0.3% gain, and the outturn of the third quarter, 

accounting for 0.2 percentage points of total growth. 

     However, over household spending increased by just 1.7% between 

2016 and 2017, the slowest rate of annual growth since 2011. 

     However, sluggish spending growth did not translate into greater 

savings, as the savings ratio steadied at 5.2%.  However, on the 

non-financial account, which includes outlays for large capital 

transactions, net borrowing hit Stg2.2 billion, down from Stg2.5 billion 

in the third quarter, but the fifth straight quarter of net household 

borrowing, the longest stretch since records began in 1987. 

     Business investment continued to hold up in the wake of the Brexit 

vote, rising by 0.3% in the fourth quarter, up from the flat result 

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

annual basis, business investment increased by 2.6% in the fourth 

quarter, better than the originally-reported 2.1% advance. 

     Over the fourth quarter of 2016, external trade provided less of a 

drag than reported a month ago. Exports slipped by 0.9%, while imports 

rose by 0.4%. As a result, net trade shaved 0.4 percentage points from 

total growth, an improvement on the 0.5 percentage point drag included 

in the second estimate of GDP. 

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

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

     Unusually, the output components to GDP were subject to significant 

revisions, with a downgrade to service output countered by a large 

improvement in construction output.  

     The dominant service sector growth expanded by at 0.4% in the 

fourth quarter, down from the 0.6% gain estimated last month, 

contributing 0.3 percentage points to total growth. 

     In the month of January, service output expanded by 0.2% over 

December and by 1.3% over the same month of 2017, according to a 

separate report released on Thursday. In the three months to January, 

the service sector rose by 0.6% over the previous three-month period.   

     Industrial output expanded by 0.4% in the fourth quarter, a bit 

less than the previously-reported 0.5% gain, adding 0.1 percentage 

points to total growth. Manufacturing activity accounted for the 

strength in the industrial sector, expanding by 1.3% in the final three 

months of the year, in line with the previous release of GDP. 

     The construction sector contracted by 0.1%, improving upon the 0.7% 

slump reported a month ago, exerting a neutral effect on total growth. 

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