MNI DATA ANALYSIS: Q4 GDP Up Modestly Despite Sharp Dec Fall>

-UK Q4 GDP +0.2% vs +0.6% Q3; Dec -0.4% m/m; largest fall since Mar 2016

-UK Q4 Business Investment -1.4% q/q; 4th straight decline

-UK Q4 Manufacturing -0.9% q/q; car production -4.9% q/q

By Laurie Laird, Les Commons and Jai Lakhani

     London (MNI) - UK economic growth slowed in the final quarter of 

2018, dampened by a sharp fall in business investment and car 

production, but remained in positive territory, despite a dramatic 

decline in December. 

     Gross domestic product rose by 0.2% in the three months to 

December, according to preliminary data released on Monday, below the 

median MNI forecast of a 0.3% gain, and down from the 0.6% pace recorded 

over the penultimate quarter of 2018.    

     On an annual basis, GDP expanded by 1.3%, the slowest rate since 

the second quarter of 2012, down from a 1.6% pace in the third quarter 

and falling short of the MNI median of 1.4%. 

     The result fell short of the 0.3% growth rate forecast of Bank of 

England staff, as reported in minutes of the February Monetary Policy 

Committee meeting, slightly higher than the 0.2% expected at the time of 

the December MPC meeting. 

     Moderate fourth quarter growth comes despite the marked slowdown in 

December. GDP receded by 0.4% in the final month of the year, well below 

the MNI median of no change, down sharply from growth of 0.2% seen in 

November, marking the weakest monthly growth since March of 2016. 

--INVESTMENT DECLINES 

     A fourth straight quarterly decline in business investment 

accounted for much of the slowdown in economic growth.  Investment 

slumped by 1.4% in the final three months of 2018, or by 3.7% over the 

same period of 2017, the biggest annual drop since the first quarter of 

2010. Business investment lopped 0.13 percentage points from quarterly 

growth.  

     But household spending kept the broader economy on track, rising by 

0.4% in the fourth quarter, matching the pace recorded in the previous 

three months, adding 0.27 percentage points to growth. 

     Net trade subtracted 0.12 percentage points from growth in the 

fourth quarter, as exports increased by 0.9% over the previous three 

months and imports rose by 1.3%, pushing the deficit up to Stg10.355 

billion from Stg9.503 billion in the third quarter. 

     Over the month of December, the deficit narrowed modestly to 

Stg3.229 billion from Stg3.615 billion in August, compared to the MNI 

median forecast of a Stg3.1 billion gap. The shortfall in goods declined 

to Stg12.102 billion, topping the MNI median of Stg11.9 billion, from 

Stg12.400 billion the previous month. 

     A 4.9% fall in car production in the final three months of 2018 -- 

the biggest drop since the first quarter of 2009 -- pushed total 

manufacturing 0.9% lower in the final quarter. Manufacturing has 

declined for three of the last four quarters, shaving 0.1 percentage 

point from total growth in the last three months of the year. 

     Over the month of December, manufacturing declined by 0.7%, the 

sixth straight monthly decline, the longest stretch since the half year 

ending in February 2009. 

     Total industrial production fell by 1.1% in the fourth quarter, 

reversing a 0.6% gain in the third quarter.  Production, which accounts 

for 13.8% of total output, subtracted 0.15 percentage points from total 

growth. 

     Over the month of December, production fell by 0.5%, below the MNI 

median forecast of a 0.1% increase, following a 0.3% decline in 

November. 

--SERVICES THE SAVER

     That left the dominant service sector to do the heavy lifting in 

the fourth quarter, rising by 0.4%, in line with the MNI median 

forecast, down from a 0.5% gain in the previous period. Services, which 

comprise 79.6% of total output, added 0.35 percentage points to total 

growth.  

     Output of services declined by 0.2% between November and December, 

falling short of the MNI median forecast of no change, after rising by 

0.3% in November.  Wholesale and retail trade accounted for much of the 

monthly weakness. 

     Construction broke a two-quarter streak of improvement, declining 

by 0.3%, subtracting 0.02 percentage points from total growth. 

     Over the month of December, construction slumped by 2.8% over 

November, the largest fall since June of 2012. 

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

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