Growth figures may just be ‘a flash in the pan’

UK gross domestic product (GDP) is estimated to have grown by 0.5% in Quarter 1 (Jan to Mar) 2019, having slowed to 0.2% growth in the previous quarter.

This is in line with the latest expectations says the Bank of England and slightly above those from the National Institute of Economic and Social Research.

The UK economy grew by 1.8% compared with the same quarter in the previous year (Figure 1), its fastest rate since Quarter 3 (July to Sept) 2017.

The strength in quarterly growth is in part due to the low December 2018 monthly growth in the base period, which makes the current period look stronger in comparison.

Having fallen by 0.3% in December 2018, there was offsetting strength in January 2019 as output increased by 0.5%, followed by a further increase of 0.2% in February 2019. Real GDP growth is estimated to have contracted by 0.1% in March 2019.

Responding to the announcement over GDP statistics for the UK, Tej Parikh, Senior Economist at the Institute of Directors, says:

“The relatively strong growth figures for Q1 may just be a flash in the pan.

“Some businesses brought activity forward early this year in preparation for leaving the EU, so higher stocks and earlier orders have artificially bumped up the growth numbers. In Q2 many firms will be keen to run down their Brexit caches, which will drag on economic growth. Keen consumers also played a key role in lifting sales in the first quarter, but barring temporary boosts due to weather, households will overall remain cautious in the months ahead.

“While the Brexit extension avoided the immediate risk of ‘no deal’, the economy will remain in a state of limbo until there is a clear path out of this situation. Households are still being put off from making big purchases and business leaders are shelving major projects. The economy has undoubtedly displayed some resilience, but if the uncertainty abated we could be building upon this solid base.”