ONS – Monthly economic commentary: March 2018
The UK economy grew by 0.4% in Quarter 4 (Oct to Dec) 2017, unrevised from the second estimate of gross domestic product (GDP); on a calendar-year basis, the economy grew by an upwardly revised 1.8% in 2017.
There have been revisions to components of the output measure of GDP across 2017, with construction seeing the most marked revisions.
Estimates for the expenditure components of GDP show that private consumption, government consumption and gross fixed capital formation all contributed positively to growth in Quarter 4 2017, while net trade subtracted from growth.
The households’ saving ratio hit a record low of 4.9% in 2017, while the current account deficit is now at 4.1% of GDP – its narrowest since 2011.
Growth in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) fell to 2.5% in February 2018, while growth in input and output Produce Price Index (PPI) both fell to 3.4% and 2.6% respectively.
Unemployment remained at 4.3% in the three months to January 2018, the same as in the previous quarter.
UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.4% between Quarter 3 (July to Sept) and Quarter 4 (Oct to Dec) 2017, unrevised from the second estimate of GDP.
Growth in the latest quarter was driven by professional, scientific, administration and support activities within the services sector.
GDP was estimated to have increased by 1.8% between 2016 and 2017, an upward revision of 0.1 percentage points from the second estimate; this was slightly lower than the 1.9% growth seen between 2015 and 2016.
Household spending grew by 1.7% between 2016 and 2017, its slowest rate of annual growth since 2011, in part reflecting the increased prices faced by consumers.
This release incorporates additional Value Added Tax (VAT) turnover data in the calculation of the output approach to measuring GDP for the first three quarters of 2017.
Gross fixed capital formation (GFCF), in volume terms, was estimated to have increased by 1.1% to £84.1 billion in Quarter 4 (Oct to Dec) 2017 from £83.2 billion in Quarter 3 (July to Sept) 2017.
Business investment was estimated to have increased by 0.3% to £46.2 billion in Quarter 4 2017 from £46.1 billion in Quarter 3 2017.
Between Quarter 4 2016 and Quarter 4 2017, GFCF was estimated to have increased by 4.0% from £80.9 billion; business investment was estimated to have increased by 2.6% from £45.0 billion.
Between 2016 and 2017, GFCF grew by 4.0% and business investment grew by 2.4%; the 4.0% increase in GFCF for 2017 was the strongest annual increase of any G7 nation.
The main assets that contributed to the 1.1% GFCF increase between Quarter 3 2017 and Quarter 4 2017 were intellectual property products, and other buildings and structure and transfer costs.
The sectors that contributed to GFCF growth over the same period were general government, private sector dwellings and business investment.
The UK’s current account deficit was £18.4 billion (3.6% of gross domestic product (GDP)) in Quarter 4 (Oct to Dec) 2017, a narrowing of £0.7 billion from a revised deficit of £19.2 billion (3.7% of GDP) in Quarter 3 (July to Sept) 2017.
This is the narrowest current account deficit as a percentage of GDP since Quarter 1 (Jan to Mar) 2012 when it was 3.1%.
The narrowing in the current account deficit in Quarter 4 2017 was due mostly to a narrowing of the deficits on primary income and secondary income; partially offsetting these was a widening to the deficit on total trade.
The primary income deficit narrowed by £1.8 billion to £6.6 billion in Quarter 4 2017 as UK earnings on investment abroad increased by £1.0 billion and payments to foreign investors decreased by £0.7 billion.
The secondary income deficit narrowed by £1.4 billion to £4.2 billion in Quarter 4 2017 as payments by general government decreased.
The trade in goods deficit widened to £35.7 billion in Quarter 4 2017 with exports decreasing by £1.8 billion and imports increasing by £1.1 billion.
The international investment position shows UK net liabilities of £260.0 billion at the end of Quarter 4 2017.
Annually, the UK’s current account deficit was £82.9 billion (4.1% of GDP) in 2017, a narrowing of £30.7 billion from a deficit of £113.6 billion in 2016; this is the narrowest deficit as a percentage of GDP since 2011 when it was 2.4%.
The households’ saving ratio fell to an annual record low of 4.9% in 2017 (since comparable records began in 1963) as growth in households’ spending exceeded the growth of households’ income.
Latest estimates suggest households were net borrowers in 2017 for the first time since records began in 1987; this reflects five consecutive quarters of net borrowing by households.
Real household disposable income growth slowed to 0.1% in Quarter 4 (Oct to Dec) 2017 compared with the previous quarter, as the impact of inflation on income intensified.
Households accumulated slightly more debt (loans) in 2017 than they did financial assets for the first time since records began in 1987.
In Quarter 4 (Oct to Dec) 2017, household spending (adjusted for inflation) grew by 0.3% compared with Quarter 3 (July to Sept) 2017.
The main contribution to growth can be seen in housing, which has increased by 0.4% compared with Quarter 3 2017.
Household spending grew 1.2% in Quarter 4 2017, when compared with Quarter 4 2016.
Household spending has increased by 1.7% in 2017 when compared with 2016.
In Quarter 4 2017, current price spending increased by 0.9% compared with Quarter 3 2017.
In the three months to January 2018, services output increased by 0.6% compared with the three months ending October 2017; this is the strongest growth since the three months ending December 2016.
Architectural and engineering activities made the largest contribution to the three-month on three-month growth, contributing 0.08 percentage points.
In the three months to January 2018, services output increased by 1.3% compared with the three months ending January 2017.
The Index of Services increased by 0.2% between December 2017 and January 2018.
Architectural and engineering activities made the largest contribution to the month-on-month growth, contributing 0.07 percentage points; motion pictures offset this, contributing negative 0.09 percentage points following a strong performance in December.
Commenting on today’s national accounts figures, Head of National Accounts Rob Kent-Smith said:
“Economic growth at the end of last year was unrevised with services and manufacturing continuing to drive growth.
“Household borrowing increased throughout 2017, while their saving was the lowest on record. However, the UK’s deficit with the rest of the world shrank, as the UK received increased earnings on foreign investments thanks to a growing world economy.
“The service sector picked up in the three months to January with architecture, leasing companies and health work all boosting growth.”