MNI DATA ANALYSIS: UK Growth Accelerates in Q2; Retail Up>

-UK Q2 Services +0.5% q/q vs +0.3% Q1

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - UK growth accelerated markedly in the second 

quarter, despite a sharp downturn in manufacturing output, boosted by a 

rebound in service sector activity.  

     Gross domestic product rose by 0.4% in the second three months of 

2018, according to preliminary data released on Friday, matching the 

median MNI forecast of a 0.4% gain, up from the 0.2% pace recorded over 

the first quarter. 

     Over the month of June, GDP increased by 0.1%, according to a new 

data set introduced last month, down from a 0.3% gain in May, and below 

the MNI median forecast of 0.2%. 

     On an annual basis, GDP rose by 1.4%, above the MNI median of 1.3%, 

up from the 1.2% pace of the first quarter. 

     The result goes some way toward vindicating the recent -- and 

somewhat controversial -- decision of the Bank of England's Monetary 

Policy Committee to raise interest rates earlier this month. Committee 

members agreed that forecast a "pickup in growth to 0.4%," according to 

minutes of the latest meeting, and acknowledged that "business surveys 

... pointed to a similar pace of growth in Q3." 

     The dominant service sector accounted for much of the rebound in 

output, driven largely by retail trade. Services output expanded by 0.5% 

in the second quarter, below the median MNI forecast of 0.6%, above the 

0.4% increase in the previous period, accounting for 0.4 percentage 

points of total growth. Services comprise 79.6% of total output. 

     Output of services was flat between May and June, falling short of 

the MNI median forecast of 0.1% gain, after a 0.2% rise in May. 

     Despite the increase in retail spending, which accounts for 

approximately one third of household spending, consumption rose by just 

0.3% in the second quarter, up modestly from 0.2% in the previous 

period, accounting for 0.2 percentage points of total growth. 

     Business investment rose modestly over the second three months of 

the year, despite the uncertainty over Brexit, increasing by 0.5% over 

the second quarter, after a 0.4% fall in the previous period. Business 

investment exerted a neutral influence on total growth. 

     Net trade shaved 0.8 percentage points from growth in the second 

quarter, as exports slumped by 3.6% and imports declined by 0.8%.  

     Over the month of June, goods exports rose by 4.3% on a current 

price basis, while imports increased by 0.1%. There was no evidence of 

increased imports of food or medicine in the event of a no-deal Brexit, 

according to a National Statistics official. 

     Industrial production contracted by 0.8% in the second quarter, the 

largest fall since the fourth quarter of 2012, following the 0.4% rise 

in the opening three months of the year, dampened by the closure of a 

major North Sea oil pipeline in May. Production, which accounts for 

14.0% of total output, subtracted 0.1 percentage points from total 

growth. 

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

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