MNI DATA IMPACT: UK Q4 GDP Revised Up Despite Spending Fall

UK GDP expanded by more than originally forecast in the final three months of last year, providing further impetus to economists already upgrading forecasts for early 2021, according to the fourth quarter and 2020 full-year national accounts released on Wednesday by the Office of National Statistics.

UK gross domestic product rose by 1.3% in Q4, a significant upward revision from the 1.0% reported initially. However, a downward revision to Q2 GDP (to a 19.5% fall from the originally reported 19.0% decline) limited the upward revision to full-year GDP. Over the course of 2020, output declined by 19.8%, only slightly better than the originally-reported 19.9% fall.

The Q4 expansion outpaces growth in the US (+1.1%) and the eurozone (-0.7%). But over the course of 2020, the UK contracted by more than both the US and the eurozone.

The savings rate fell to 16.1% in Q4, from the record-high 25.9% in Q3, but remains extremely high by historical standards. Over the course of 2020, the savings rate hit a record-high 16.3%. Household spending declined by 1.7% in Q4, much worse then the initially reported 0.2% decline.

Business investment provided a big boost to the improved Q4 GDP outturn, rising 5.9% % in Q4, up from the initially-reported 1.3%, contributing 0.57 percentage points to total growth. Over the course of 2020, business investment declined by 7.4%, better than the originally-estimated 10.3% decline. Services output rose by 1.0%, outpacing the initially-reported 0.6% rise, accounting for 0.82 percentage points of total growth.

The current account deficit — excluding non-monetary gold and other precious metals — widened to GBP22.8 billion in Q4, or 4.2% of GDP.