UK Analysis: Q2 GDP Confirmed At +0.3% Q/Q; Bus Inv Upgraded>

-UK Q2 Current Account Gap Rises to Stg23.182bn from Stg22.256bn 

-UK Q2 Current Account Deficit Rises to 4.6% of GDP from 4.4% in Q1

-UK Q2 Savings Ratio Up to 5.4% from 3.8% in Q1 on data reclassification

-UK Q2 Business Investment +0.5% vs no change in previous estimate

-UK Q2 Net Trade adds 0.4pp to growth vs no effect in previous estimate

-UK Q2 Household Spending +0.2% vs +0.1% previous estimate, +0.4% Q1

 By Laurie Laird and Jamie Satchithanantham 

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

quarter, confirming earlier estimates, as an upward revision to business 

investment countered a slowdown in consumer spending. 

     Gross domestic product expanded by 0.3% in the second quarter, 

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

month ago. 

     On an annual basis, output rose by 1.5%, falling short of the MNI 

median forecast of 1.7%, below the 1.7% gain reported in the second 

estimate of GDP. That's the slowest pace of annual growth since the 

first quarter of 2013. 

     Growth over the first quarter was revised higher, to 0.3% from the 

originally-reported 0.2%. Over the first six months of the year, the 

economy expanded by 0.7%, the slowest first-half growth since the 

opening six months of 2012, when output rise by 0.5%, according to a 

National Statistics official. 

     Meanwhile, the current account deficit widened in the first 

quarter, expanding to Stg23.182 billion, compared to the MNI median 

forecast of Stg15.7 billion, from Stg22.256 in the final three months of 

2014. A widening of the primary income deficit to Stg10.195 billion from 

Stg8.781 billion accounted for much of the expansion in the current 

account deficit. 

     That took the shortfall to 4.6% of GDP, up from 4.4% in the first 

three months of 2017. 

     Growth over 2016 was confirmed at 1.8%, in line with previous 

reports. 

     A marked slowdown in consumer spending, which comprises just under 

two-thirds of GDP, kept growth in check. Household consumption increased 

by just 0.2% in the second quarter, better than the previously-reported 

0.1% gain, but down from growth of 0.4% in the opening three months of 

the year. That's the slowest pace since the final quarter of 2014, and 

accounted for 0.1 percentage points of total growth. 

     The savings rate for the first quarter was revised sharply upward, 

after a reclassification of data to better capture dividend payments to 

incorporated self-employed workers. The savings rate jumped to 5.4% in 

the second quarter from a record-low of 3.8% in the first quarter, 

although the new data series only dates back to 1997. 

     Business investment was revised sharply higher, despite the 

uncertainty introduced by the vote to leave the European Union in June 

of 2016. Investment rose by 0.5% in the second quarter, up from the no 

change reported last month. Business investment over the first quarter 

was revised upward by 0.2 percentage points to register a gain of 0.8%. 

     Over the first three months of 2017, external trade provided a 

boost to growth, after exerting a neutral effect in the previous 

estimate of GDP. Exports increased by 1.7%, while imports rose by just 

0.2%, leaving net trade to add 0.4 percentage points from total growth 

in the second quarter. 

     Government spending rose by 0.1%, down from the previously-reported 

0.6% rise, exerting a neutral effect on growth. The downward revision 

stems from the inclusion of so-called outcome data, rather than 

projections, according to a National Statistics official. 

     There were notable revisions to the output components, with the 

dominant service sector performing less robustly than originally 

reported. 

     Service output expanded by at 0.4% in the second quarter, down from 

the 0.5% gain estimated last month, contributing 0.3 percentage points 

to total growth. However, that's an acceleration from the 0.1% growth in 

the first quarter of the year. 

     In the month of July, service output declined by 0.2% over June, 

the biggest fall since December of 2016, rising by 1.5% over the same 

month of 2016, according to a separate report released on Friday. In the 

three months to July, the service sector rose by 0.5% over the previous 

three-month period.   

     Industrial output slipped by 0.3% in the second quarter, unchanged 

from the previous release, exerting a neutral effect on growth. 

     The construction sector contracted by 0.5%, improving upon the 

1.3% slump reported a month ago, also exerting a neutral effect on total 

growth.   

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

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