UK economy grew 0.1% in Q1, ONS confirms
Newsflash: The UK has avoided recession over the winter, the latest national accounts confirm.
The Office for National Statistics has confirmed that the economy grew by 0.1% in the first three months of this year, and also in the final quarter of 2022.
That matches the initial estimate, and shows that the UK economy avoided contracting through the cost of living crisis last winter.
The ONS says:
In output terms, the services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by a revised 0.4% (previously 0.7%), while the production sector grew by 0.1%, with a revised 0.6% growth in manufacturing (previously 0.5%).
Key events
Nationwide: rising borrowing costs will drag on housing market
Robert Gardner, Nationwide’s chief economist, says annual house price growth was “broadly stable” at -3.5% in June, little changed from the 3.4% decline recorded in May.
Prices were also fairly stable over the month, rising by a modest 0.1%, after taking account of seasonal effects, reversing the 0.1% decline seen in May.
Gardner adds that rising interest rates will cool the economy:
“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term.
For example, for a representative first-time buyer earning the average wage and buying the typical property with a 20% deposit, mortgage payments as a share of take-home pay are now well above the long-run average, as illustrated in the chart below.
Also, house prices remain high relative to earnings, and as a result, deposit requirements are still a significant barrier for those looking to enter the market, Gardner adds:
A 10% deposit on a typical first-time buyer home is equal to around 55% of gross annual income – this is down from the all-time highs of 59% prevailing in late 2022, but still marginally above the levels prevailing before the financial crisis struck in 2007/8.
UK house prices rose in June
UK house prices have risen, unexpectedly, in June – but are falling on an anual basis.
Nationwide reports that house price inched up by 0.1% this month, on a seasonally-adjusted basis.
The average price rose to £262,239 from £260,736. Economists predicted a fall of 0.3%.
But on an annual basis, house prices are 3.5% lower than a year ago, a small acceleration on the 3.4% fall in May (which was the fastest drop since 2009).
Nationwide reports that all regions except Northern Ireland recorded annual price falls in Q2.
East Anglia was the weakest performing region with prices down 4.7% year-on-year
The squeeze on UK households intensified at the start of this year, this morning’s national accounts show.
Real households’ disposable income (RHDI) fell by 0.8% following positive growth of 1.3% in Quarter 4 (Oct to Dec) 2022.
The ONS also reports that households experienced “simultaneous withdrawals from their deposit accounts and negative secured loans for the first time ever”.
UK economy grew 0.1% in Q1, ONS confirms
Newsflash: The UK has avoided recession over the winter, the latest national accounts confirm.
The Office for National Statistics has confirmed that the economy grew by 0.1% in the first three months of this year, and also in the final quarter of 2022.
That matches the initial estimate, and shows that the UK economy avoided contracting through the cost of living crisis last winter.
The ONS says:
In output terms, the services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by a revised 0.4% (previously 0.7%), while the production sector grew by 0.1%, with a revised 0.6% growth in manufacturing (previously 0.5%).
We have encouraging news from the UK car sector.
UK car production rose for the fourth consecutive month in May, up 26.9% year on year, according to the latest figures published today by the Society of Motor Manufacturers and Traders (SMMT).
The SMMT reports that:
79,046 units left production lines, 16,762 more than in the same month last year, as manufacturers defied the challenging economic backdrop to fulfil customer demand for the latest British-built models, at home and overseas, although the total was still down -31.9% on May 2019.
Earlier this week, the UK car industry warned that the growth of electric car production in Britain is under threat from a Brexit “cliff edge” in January unless the EU agrees to delay new trade rules until 2027.
China’s factory and service sectors stumble amid economic malaise
China’s factory activity declined for a third straight month in June, and growth in other sectors has slowed.
The official manufacturing purchasing managers’ index (PMI), released earlier today, inched up to 49.0 from 48.8 in May. That left China’s factory PMI below the 50-point mark that separates expansion from contraction.
The non-manufacturing PMI fell to 53.2 from 54.50 in May, indicating a slowdown in service sector activity and construction.
A worrying sign for the global economy….
Introduction: UK national accounts, house price data and eurozone inflation all due
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Two pieces of data this morning will give us a new insight into the state of the UK economy.
The UK’s GDP quarterly national accounts, for January to March 2023, are due at 7am. They will show how fast (or how slowly) the economy grew in the quarter, how various sectors of the economy performed, and how households fared.
The initial estimate was that the economy grew by 0.1% in Q1, and in the last quarter of 2022, thus avoiding a recession. That could be revised today, though.
We’ll also get a healthheck on the UK property market, from Nationwide’s monthly house price index (also expected at 7am, so we’ll be busy).
A month ago, Nationwide reported that UK house prices fell at their fastest annual pace for nearly 14 years in May, by 3.4%, and economists predict a larger fall in June.
Also coming up
Inflation will also be in focus today, with the latest cost of living data from Europe. Eurozone headline CPI inflation is forecast to have slowed to 5.6%, from 6.1%, but core inflation could nudge higher.
In the US, the Federal Reserve’s preferred measure of price-growth – core PCE -is expected to show that core elements of inflation remain stubborn. That could encourage the Fed to maintain tight monetary policy, to squeeze the US economy.
We’ll also be tracking Thames Water, which has refused to say when it will publish its annual report and accounts, which had been expected by investors next week, as concerns mount over the company’s financial viability.
The agenda
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7am BST: UK quarterly national accounts for January-March
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7am BST: Nationwide house price index for June
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7.45am BST: French inflation report for June
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8.55am BST: German unemployment report for June
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10am BST: Eurozone inflation report for June
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1.30pm BST: US PCE index of inflation for May
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3pm BST: University of Michigan survey of US consumer confidence
