UK economy grew faster than thought in first quarter of 2024 – business live | Business

An upward revision to first-quarter GDP growth from 0.6% quarter-on-quarter to 0.7% quarter-on-quarter suggests that whichever prime minister is in place by this time next week could benefit from the economic recovery being a bit stronger than expected.

That’s what he says gender Daleschief economist of Great Britain in Capital economy.

He told clients that the economy could grow faster than expected this year:

The higher GDP growth in Q1 was mainly due to upward revisions in consumer spending (from +0.2% q/q to +0.4% q/q) and the contribution of net trade (from +0.4ppts to + 0.6ppts) more than offsetting downward revisions to government spending (from +0.3% q/q to 0.0% q/q) and housing investment (from +4.1% q/q to +3.2 % q/q).

The revision suggests that real GDP growth in 2024 is more likely overall to be slightly above our existing forecast of 1.0%.

The UK stock market opened higher as traders reported data today’s UK GDP upgrade.

The FTSE 100 rose 40 points, or 0.5%, to 8,220, reversing yesterday’s decline.

Year to date, the Footsie has gained over 6%.

Mark Preskett, senior portfolio manager at Morningstar Wealthsays:

“The upward revision of UK GDP for the first quarter is encouraging and further evidence that the UK economy is recovering. The rise in services – to 0.8% from 0.7% – supports what we see in the inflation data.

“Among UK equities, we have seen increased dividend payments, share buybacks and M&A activity this year and this suggests that some of the positive economic activity is being translated into improved shareholder returns.”

Bad news! Business investment in the UK was weaker than initial estimates earlier this year.

Today’s National Accounts of the United Kingdom estimates that business investment rose 0.5% in the January-March quarter, down from a previous estimate of 0.9% growth.

Compared to the same quarter a year ago, business investment is estimated to have declined by 1.0%.

This is a blow as business investment is key to achieving improved performance and growth. Rising interest rates make it harder for businesses to invest.

UK real disposable household income (RHDI) is expected to have risen by 0.7% in the first quarter of this year, matching growth in Q4 2023.

It’s a measure of how much after-tax income a household is left with after you’ve adjusted for inflation.

The ONS reports that wages rose in the last quarter, but so did tax take…

Within the RHDI, nominal gross disposable income rose by 1.1%, due to an increase in employee compensation of £4.3 billion. This alone is due to a £3.0 billion increase in wages and a £3.4 billion reduction in actual household social security contributions paid by employees, due to the reduction in the rate of National Insurance contributions to the employees.

This was offset by a £3.6bn rise in income and wealth taxes, which was driven by a £3.1bn rise in self-employment taxes and a rise in the implied deflator of 0.4%.

Interestingly, the UK’s household savings ratio has risen – indicating that people have more spare cash than at the end of last year.

The household savings rate is estimated at 11.1% in the January-March quarter, up from 10.2% in the October-December quarter.

This ratio measures the average percentage of disposable income that is saved.

The ONS says this is due to increases in pensions, wage income and a cut in national insurance rates at the start of the year.

GDP per capita is a better measure of economic performance because it measures how much the economy has grown for each member of the population.

And here is finally some good news.

Real GDP per capita is expected to have increased by 0.5% in the first quarter of 2024, up from a previous estimate of 0.4% growth.

This follows seven consecutive quarters without positive growth.

And on an annualized basis, real GDP per capita – basically a measure of living standards – is estimated to be 0.6% lower than in the same quarter a year ago.

This table, from today’s National Accounts, shows how the UK was the fastest growing member of the G7 in Q1….

….but lags behind many competitors when you look at post-pandemic growth.

As you can see, Great Britain (+0.7%) posted the fastest quarterly growth in Q1, before Canada (+0.4%), Italy and on US (both +0.3%), France and Germany (both +0.2%) and Japan (which shrinks by 0.5%).

But since the end of 2019, the UK has grown by 1.8%, slower than the US, Canada, Italy, France and Japan, but better than Germany, which has barely grown since then.

Good morning and welcome to our ongoing coverage of business, financial markets and the global economy.

The UK economy grew faster than expected at the start of this year after emerging from last year’s recession.

The updated GDP figures just released showed that the economy grew by 0.7% in January-March.

This is up from a previous estimate of 0.6% and confirms that the UK was the fastest growing G7 economy in the first quarter of this year. This may support Rishi Sunak’s argument that the economy is turning around ahead of next week’s general election.

The Office for National Statistics published this encouraging news in the latest UK release GDP quarterly national accounts, for January to March 2024

They show that the UK services sector expanded by 0.8% in the quarter, up from a previous estimate of 0.7% growth.

However, manufacturing is now estimated at 0.6% growth, revised down from a 0.8% increase.

The construction sector shrank 0.6% as builders were hit by bad weather this year.

The ONS reports:

• On the expenditure side, there were increases in the volume of net trade and household spending, partially offset by declines in gross capital formation and government consumption.

• The household savings rate is estimated at 11.1% in the last quarter, up from 10.2% in the fourth quarter (October to December) of 2023.

• Real household disposable income (RHDI) is estimated to have grown by 0.7% in the first quarter of 2024, maintaining the same growth as the previous quarter.

Today’s GDP report also confirms that the economy shrank in the second half of last year – contracting 0.1% in the 3rd quarter and 0.3% in the 4th quarter – a technical recession.

The agenda

• 7am BST: UK National Accounts for Q1 2024

• 7am BST: German retail sales for May

• 7.45am BST: French inflation rate for June

• 8.55am BST: German unemployment report for June

• 10am BST: Italy Inflation for June

• 13.30 BST: US PCE Inflation Index for May

• 15:00 BST: University of Michigan Consumer Sentiment Index for June