MNI INTERVIEW: Broad Growth For Buoyant UK Economy-ONS Fitzner
Driven by solid growth across the service sector, the UK exits recession.
The UK economy bounced out of a technical recession in Q1 2024, posting some “pretty positive numbers," the chief economist at the Office for National Statistics told MNI Friday
“What really strikes me is how broad-based the growth is, particularly across the services sector, with 11 out of 14 sub-sectors showing growth in the latest quarter, a buoyant first quarter indeed,” Grant Fitzner said in an interview.
“You could point to one or two small negatives, but overall, its strong data,” he said, noting that construction, hit by the very wet weather through March, was one drag on an economy that grew 0.6% q/q, more strongly than expected by many.
Fitzner pointed to strong growth in consumer-facing services, although he noted they were still 5.1% below pre-pandemic levels. The auto industry and business investment were also stand outs.
The economy fell into a technical recession in the second half of 2024, shrinking by 0.1% in Q3 and 0.3% in Q4. Overall, UK GDP is now 1.7% above its pre pandemic level.
Although the ONS is not in the business of forecasting the economy, Fitzner pointed to strong survey data in recent months suggesting the UK economy was in a good place.
“Our own Business Insights and Conditions Survey (BICS), a survey of corporate turnover expectations, found around 10% of firms expected turnover to be lower in May and 21% expected to be higher," he said, "With businesses reasonably good at forecasting their turnover, that also is a signal that any strength may continue into the second quarter. Of course much will depend on what happens to inflation, interest rates, mortgage rates further on in 2024." (See MNI INTERVIEW: Upbeat UK Confidence Read Grounds For Optimism-GfK)
POPULATION GROWTH
On Thursday, the Bank of England upped its outlook for GDP over its current forecast horizon, now signalling growth of 0.5% (0.25%) in 2024 and 1.0% (0.75%) in 2025 -- in large part driven by the population growth highlighted by the ONS in recent weeks. (See MNI BOE WATCH: Holds In May, Takes Another Step Towards Cut)
Fitzner said the BOE was probably correct to make such assumptions, but quantification of data was difficult.
“It's not a one-for-one correlation. If there were more people, presumably buying more stuff, so you would expect that that would be positive for consumption. Likewise, the more people in employment it has to be positive for wages and income,” he said.
“But once you dig into the details, it's a more complicated relationship than that, obviously.”
TRADE FLOWS
Fitzner played down the impact of events across the Middle East on the UK economy.
“Everyone expected there will be disruption from events in and around the Red Sea, and we really haven't seen that much,” he said.
“Anecdotally, businesses are saying that they've learned how to be more resilient and less reliant on just-in-time logistics post-pandemic and post the global supply chain breakdown," he siad.
“We're probably all paying a little bit more in terms of shipping rates. But we see warehouses with higher levels of inventory, and retailers, wholesalers have adjusted to the new world where these sorts of shocks seem to happen periodically.”