Wednesday May 23 2018
UK Inflation Rate Eases to 2.4% in April
ONS | Joana Taborda | joana.taborda@tradingeconomics.com

Annual inflation in the UK edged down to 2.4 percent in April of 2018 from 2.5 percent in March, below market expectations of 2.5 percent. It is the lowest rate since March of 2017, mainly due to a slowdown in cost of transport amid a drop in air fares.

Year-on-year, prices rose at a slower pace for: transport (2.4 percent compared to 3 percent), mainly due to a 7.9 percent slump in air fare costs amid differences in the Easter timming while fuels and lubricants went up 3.1 percent; food and non-alcoholic beverages (2.7 percent compared to 3 percent), namely meat; clothing and footwear (1.7 percent compared to 2.5 percent); and health (2.7 percent compared to 2.8 percent). On the other hand, inflation was steady for housing and utilities (2.1 percent) and education (2.8 percent) and prices increased more for recreation and culture (3.5 percent from 3.3 percent); restaurants and hotels (2.7 percent compared to 2.5 percent); furniture, household equipment and maintenance (2.7 percent compared to 2.5 percent); and alcoholic beverages and tobacco (4 percent compared to 3.5 percent). Also, cost rebounded for communication (1 percent compared to -0.4 percent) and prices of miscellaneous goods and services were flat after a 0.1 percent decline in March.

The consumer prices index including owner occupiers’ housing costs (CPIH) rose by 2.2 percent in April, easing from a 2.3 percent increase in March.

The annual core inflation rate, which excludes prices of energy, food, alcohol and tobacco, declined to 2.1 percent in April from 2.3 percent in March, also below market consensus of 2.2 percent and the lowest rate since March of 2017.

On a monthly basis, consumer prices rose 0.4 percent, following a 0.1 percent gain in March but below forecasts of 0.5 percent. The largest downward contribution came from transport, principally from air fares. The timing of Easter in the middle of April 2017 contributed to air fares rising by 18.6 percent on the month whereas this year, Easter fell at the beginning of April before the price collection period and there was no price rise. Instead, fares fell slightly, by 0.2 percent. Within the transport category, the downward contribution from air fares was partially offset by an upward effect from motor fuels. Petrol prices rose by 1.5 pence per litre to stand at 120.7 pence per litre and diesel prices rose by 1.6 pence per litre. Clothing and footwear also had a downward effect, with prices rising by 0.4 percent. The effect came mainly from men’s clothing. A smaller downward contribution came from food and non-alcoholic beverages. This was from a range of food products with the largest single effect from meat. The downward contribution from food was partially offset by an upward effect from mineral waters, soft drinks and juices, where prices rose by 2.8 percent. Most of this effect came from products affected by the introduction of the Soft Drinks Industry Levy or “Sugar Tax”, such as colas and energy drinks. The downward effects from these broad categories were partially offset by a small upward contribution from communication, where prices of telephone equipment and services rose by 0.4 percent, entirely due to communication services comprising, for example, internet access, television and phone services.




Tuesday May 15 2018
UK Unemployment Rate at 42-Year Low
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The unemployment rate in the UK stood at a 42-year low of 4.2 percent in the three months to March 2018, matching market expectations. The number of unemployed declined by 46,000 from the October to December period while employment increased by 197,000, the biggest quarterly increase since the end of 2015 and way above market expectations of a 130,000 gain.

There were 1.42 million unemployed people, 46,000 fewer than for October to December 2017 and 116,000 fewer than for a year earlier. The unemployment rate was 4.2 percent, down from 4.6 percent for a year earlier and the joint lowest since 1975.

There were 32.34 million people in work, 197,000 more than for October to December 2017 and 396,000 more than for a year earlier. The employment rate was 75.6 percent, higher than for a year earlier (74.8 percent) and the highest since comparable records began in 1971.

There were 8.66 million people aged from 16 to 64 years who were economically inactive, 115,000 fewer than for October to December 2017 and 171,000 fewer than for a year earlier. The inactivity rate (the proportion of people aged from 16 to 64 years who were economically inactive) was 21.0 percent, lower than for a year earlier (21.5 percent) and the lowest since comparable records began in 1971.

Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.9% excluding bonuses, and by 2.6% including bonuses, compared with a year earlier. Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.4% excluding bonuses, but were unchanged including bonuses, compared with a year earlier.




Thursday May 10 2018
BoE Holds Key Interest Rate at 0.5%
Bank of England | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Bank of England voted by seven to two to keep the Bank Rate at 0.5 percent on May 10th, due to a sharp slowdown in GDP growth in the first quarter. Still, policymakers noted that wage growth and domestic cost pressures are firming gradually while CPI inflation is projected to fall back slightly more quickly than previously estimated. The bank also said that the recent weakness in data had been consistent with a temporary soft patch, suggesting an August rate hike is still on the table.

Excerpts from the BoE Monetary Policy Summary:

The preliminary estimate of GDP growth in the first quarter was 0.1%, 0.3 percentage points lower than expected in February. This is likely in part to have reflected adverse weather in late February and early March. Survey indicators suggest that growth was somewhat stronger in Q1 than implied by the preliminary estimate.

Despite the near-term softness, the MPC’s central forecast for economic activity is little changed from that in the previous Report. In the MPC’s central forecast, conditioned on the gently rising path of Bank Rate implied by current market yields, GDP is expected to grow by around 1¾% per year on average over the forecast period. On the expenditure side, growth continues to rotate towards net trade and business investment and away from consumption. Although business investment is still restrained by Brexit-related uncertainties, it is being supported, like exports, by strong global demand and accommodative financial conditions. Household consumption growth remains subdued, in line with the modest growth in real income over the forecast period.

Wage growth and domestic cost pressures are firming gradually, broadly as expected. The MPC continues to judge that the UK economy has a very limited degree of slack. Hiring intentions have remained strong and, over the past three months, the unemployment rate has fallen slightly further. While modest by historical standards, the projected pace of GDP growth over the forecast is nonetheless slightly faster than the diminished rate of supply growth, which averages around 1½% per year. In the MPC’s central projection, therefore, a small margin of excess demand still emerges by early 2020, feeding through into higher rates of pay growth and domestic cost pressures.

CPI inflation fell to 2.5% in March, lower than expected at the time of the February Report. The inflation rates of the most import-intensive components of the CPI appear to have peaked. The MPC judges that the impact of the past depreciation of sterling on CPI inflation, while remaining significant, is likely to fade a little faster than previously thought. Taking external and domestic influences together, CPI inflation is projected to fall back slightly more quickly than in February, reaching the target in two years. These projections are conditioned on a gently rising path for Bank Rate over the next three years.

In the exceptional circumstances presented by Brexit, as specified in its remit, the MPC has been balancing any significant trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity. The prospect of excess demand over the forecast period has reduced the degree to which it is appropriate for the MPC to accommodate an extended period of inflation above the target. The Committee’s best collective judgement therefore remains that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon. As previously, however, that judgement relies on the economic data evolving broadly in line with the Committee’s projections. For the majority of members, an increase in Bank Rate was not required at this meeting. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.




Thursday May 10 2018
UK Posts Largest Trade Deficit in 9 Months
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The UK's trade deficit widened by GBP 1.9 billion to GBP 3.091 billion in March 2018 from an upwardly revised GBP 1.176 billion in the previous month and above market expectations of a GBP 2 billion gap. It was the largest trade deficit since last June.

Imports of goods and services to the UK surged 5.8 percent to an all-time high of GBP 56.0 billion in March from GBP 53.0 billion in the previous month. The sharp increase was due to an 8.1 percent jump in purchases of goods, led by fuels, food beverages & tobacco, and manufactured goods; while imports of services dropped 0.3 percent. Among trading partners, imports of goods from the EU grew 5.8 percent, mainly from Germany (4.6 percent), the Netherlands (5.1 percent), France (4.7 percent), Belgium & Luxembourg (2.9 percent) and Spain (6 percent). In addition, purchases from non-EU countries rebounded sharply by 11.3 percent, as imports increased the most from Norway (72.6 percent), the US (8.3 percent), China (1.2 percent) and Japan (12.2 percent).

Exports went up at a softer 2.2 percent to GBP 52.9 billion in March from GBP 51.8 billion in the previous month, due to higher sales of goods (4.4 percent), mainly fuels and manufactured goods. Exports of services, however, dropped 0.4 percent. Among major trading partners, exports of goods to the EU advanced 4.9 percent, as sales increased mainly to France (6 percent), Ireland (8.7 percent), Italy (5.1 percent) and Spain (11.1 percent). Also, sales to non-EU countries grew 4 percent, namely to the US (7.1 percent), Hong Kong (8.7 percent), Switzerland (22.9 percent) and South Korea (65.2 percent). 

In the first quarter of the year, the trade deficit narrowed GBP 0.7 billion to GBP 6.9 billion, due mainly to falling goods imports from non-EU countries.




Friday April 27 2018
UK Q1 Annual GDP Growth Weakest Since 2012
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The British economy expanded by 1.2 percent year-on-year in the first quarter of 2018, missing market expectations of 1.4 percent, a preliminary estimate showed. It was the weakest pace of expansion since the second quarter of 2012.

Services advanced 1.2 percent in the first quarter, compared with 1.1 percent in the previous period. Within the services aggregate, output expanded for: distribution, hotels and restaurants (0.7 percent vs 0.2 percent in Q4); transport, storage and communications (2.8 percent vs 2.1 percent); and business services and finance (1.7 percent, the same as in Q4).

Total production grew 2.2 percent after increasing 1.9 percent in the fourth quarter. Within the production aggregate, main contributors to growth were mining and quarrying (1.3 percent vs 0.6 percent), and electricity and gas (3.7 percent vs -1.7 percent); while manufacturing growth slowed to 2.5 percent from 2.9 percent in Q4 and water supply, sewerage, waste management and remediation activities continued to fall (-2.8 percent vs -0.5 percent).

Construction output was estimated to have decreased by 3.3 percent, following an advance of 2.3 percent during the previous period.




Friday April 27 2018
UK Q1 GDP Growth Slows to Weakest in 5 Years
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The British economy grew by 0.1 percent on quarter in the three months to March 2018, easing from a 0.4 percent expansion in the previous period and missing market expectations of 0.3 percent, a preliminary estimate showed. It was the weakest growth rate since a 0.1 percent contraction recorded in the fourth quarter of 2012.

The services aggregate was the main driver of the growth in GDP, growing by 0.3 percent and contributing 0.21 percentage points. Production continued to grow, with a rise of 0.7 percent in the first quarter, contributing 0.10 percentage points to GDP. This was driven mainly by mining and quarrying, and electricity and gas. However, construction contracted by 3.3 percent, contributing negative 0.21 percentage points to GDP. Although agriculture contracted by 1.4 percent, the contribution was only negative 0.01 percentage points due to its low industry weight.

Services expanded by 0.3 percent in the first quarter, easing from 0.4 percent in the previous period. The business services and finance sector continued to be the main driver of growth in services in the latest quarter (0.4 percent vs 0.6 percent in Q4 2017), mainly boosted by architectural and engineering activities. Transportation, storage and communication increased by 0.4 percent, after 1.1 percent growth in the previous period, as telecommunications rose the most. Government and other services grew by 0.1 percent, the same pace as in the fourth quarter, with the largest contributor to this sector being human health activities. In contrast, distribution, hotels and catering contracted by 0.1 percent, the same as in the previous three-month period: retail trade was the largest contributor to the negative growth, decreasing by 0.5 percent.

Within production (0.7 percent vs 0.4 percent in Q4), mining and quarrying (3.5 percent vs -4.9 percent), and electricity and gas (2.3 percent vs -0.4 percent) were the largest contributors to growth. Meanwhile, manufacturing growth slowed to 0.2 percent from 1.3 percent in Q4; and water supply, sewerage, waste management and remediation activities shrank for the fourth consecurive quarter (-0.3 percent vs -0.4 percent).

Construction output was estimated to have decreased by 3.3 percent, after a 0.1 percent fall in the previous period. It was the largest slump in construction activity since the second quarter of 2012. There is some evidence of an impact of the bad weather on construction output. However, output fell across all three months of the quarter, not just during the period of bad weather.




Wednesday April 18 2018
UK Inflation Rate Eases to a Year-Low in March
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The rate of inflation in the UK fell to 2.5 percent in March 2018 from 2.7 percent in the previous month and below market expectations of 2.7 percent. It was the lowest rate since March last year.

Year-on-year, prices rose at a slower pace for: housing, water, electricity, gas and other fuels (2.1 percent vs 2.2 percent in February); clothing and footwear (2.5 percent vs 3.9 percent); and furniture, household equipment and maintenance (2.5 percent vs 3.4 percent). In addition, miscellaneous goods and services prices fell 0.1 percent, following a 0.8 percent increase in the previous month, due to a decline in cost of personal care (-1.6 percent vs -0.4 percent), financial services (-3 percent vs -2.8 percent) and other services (-1.9 percent, the same as in February).

Meanwhile, inflation was unchanged for restaurants and hotels (at 2.5 percent) and food and non-alcoholic beverages (at 3 percent); and picked up for transport (3 percent vs 2.8 percent) and recreation and culture (3.3 percent vs 3 percent).

The consumer prices index including owner occupiers’ housing costs (CPIH) rose by 2.3 percent in March, easing from a 2.5 percent increase in February.

The annual core inflation rate, which excludes prices of energy, food, alcohol and tobacco, declined to 2.3 percent in March from 2.4 percent in February, also below market consensus of 2.5 percent. It was the lowest rate in one year.

On a monthly basis, consumer prices edged up 0.1 percent in March after increasing 0.4 percent in February, and compared with expectations of a 0.3 percent gain. Prices rose for recreation and culture (0.6 percent), restaurants and hotels (0.3 percent), housing and utilities (0.1 percent) and food and non-alcoholic beverages (0.4 percent).



Tuesday April 17 2018
UK Jobless Rate Falls to New 4-Decade Low
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The unemployment rate in the UK fell to a new 42-year low of 4.2 percent in the three months to February 2018 from 4.3 percent in the September to November period and below market expectations of 4.3 percent. The number of unemployed declined by 16,000 while employment increased by 55,000, beating market expectations of a 33,000 gain.

There were 1.42 million unemployed people, 16,000 fewer than for September to November 2017 and 136,000 fewer than for a year earlier. The unemployment rate was 4.2 percent, the lowest since 1975, down from 4.3 percent in the previous period and 4.7 percent for a year earlier.

There were 32.26 million people in work, 55,000 more than for September to November 2017 and 427,000 more than for a year earlier. The employment rate was 75.4 percent, higher than for a year earlier 74.6 percent and the highest since comparable records began in 1971.

There were 8.73 million people aged from 16 to 64 years who were economically inactive, little changed compared with September to November 2017 but 154,000 fewer than for a year earlier. The inactivity rate was 21.2 percent, lower than for a year earlier (21.6 percent) and the joint lowest since comparable records began in 1971.

Latest estimates show that average weekly earnings for employees in the UK in nominal terms (that is, not adjusted for price inflation) increased by 2.8 percent, both excluding and including bonuses, compared with a year earlier. In real terms (that is, adjusted for price inflation), average weekly earnings increased by 0.2 percent excluding bonuses, and by 0.1 percent including bonuses, compared with a year earlier.


Wednesday April 11 2018
UK Trade Deficit Narrows to 5-Month Low
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The UK's trade deficit narrowed sharply by GBP 2.0 billion to GBP 0.965 billion in February 2018 from a downwardly revised GBP 2.949 billion in the previous month and below market expectations of a GBP 2.6 billion gap. It was the smallest trade deficit since September.

Imports of goods and services to the UK fell by 4.8 percent to GBP 53.41 billion in February from the previous month's record high of GBP 56.11 billion. The sharp decline was due to a 6.5 percent decrease in purchases of goods, led by fuels and manufactured goods, and a 0.2 percent drop in imports of services. Among trading partners, imports of goods from the EU fell 0.8 percent, mainly from France (-3.9 percent) and the Netherlands (-1.9 percent). In addition, purchases from non-EU countries slumped 13.3 percent, as imports decreased the most from Norway (-32 percent), the US (-20.1 percent) and Japan (-16.1 percent).

Exports of goods and services from the UK declined by 1.3 percent to GBP 52.45 billion in February from GBP 53.16 billion in the previous month, due to lower sales of goods (-2.2 percent) and services (-0.3 percent). Among major trading partners, exports of goods to non-EU countries shrank 4.7 percent, namely to the US (-17.1 percent), China (-7.1 percent), Hong Kong (-7.5 percent) and South Korea (-11.8 percent). By contrast, exports of goods to the EU grew slightly by 0.3 percent, as sales increased mainly to Germany (8.2 percent) and Ireland (3 percent), but fell to the Netherlands (-5.9 percent) and Spain (-9.8 percent).

In the three months to February 2018, the trade deficit widened by GBP 0.4 billion to GBP 6.4 billion, due mainly to a GBP 2.1 billion fall in non-EU goods exports, partially offset by increases of GBP 0.9 billion in EU goods and GBP 0.4 billion in total services exports.


Thursday March 29 2018
UK Q4 GDP Growth Confirmed at 5-1/2-Year Low
ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com

The British economy expanded by 1.4 percent year-on-year in the fourth quarter of 2017, unrevised from the second estimate and following a 1.8 percent growth in the previous period. It was the weakest pace of expansion since the second quarter of 2012.

On the expenditure side, household expenditure rose 1.2 percent, compared with 1.3 percent in Q3; while gross fixed capital formation went up at a faster 4 percent (vs 3.6 percent in Q3) as business investment growth picked up to 2.6 percent (vs 2.2 percent in Q3). Also, government spending grew by 0.6 percent, faster than 0.1 percent in the previous period.

Imports jumped 3.1 percent, following a 1.7 percent gain in Q3; while exports rose at a slower 2.7 percent, after increasing by 9 percent the previous period. As a result, the trade deficit narrowed to £8.543 billion from £9.581 billion in Q4 2016. 

On the production side, the service industries expanded 1.1 percent (vs 1.3 percent in Q3), as output rose for: distribution, hotels and restaurants (0.2 percent vs 1.8 percent in Q3); transport storage and communications (2.1 percent vs 2.5 percent); business services and finance (1.7 percent vs 1.6 percent); and government and other services (0.4 percent vs -0.1 percent). Industrial production went up 1.9 percent (vs 2.2 percent in Q3), as output rose for: manufacturing (2.9 percent vs 3.1 percent); mining and quarrying (0.6 percent vs -3.3 percent). By contrast, output shrank for: water supply, sewerage, waste management and remediation activities (-0.5 percent vs 1.1 percent); and electricity, gas, steam and air conditioning supply (-1.7 percent vs 1.7 percent). Construction expansion slowed to 2.3 percent from 5.6 percent in Q3.

In 2017 as a whole, the GDP grew by 1.8 percent, above the second estimate of 1.7 percent and compared to 1.9 percent in 2016. It was the weakest growth rate since 2012, as household consumption rose at a slower 1.7 percent (vs 3.1 percent in 2016) and government spending increased by only 0.1 percent (vs 0.8 percent in 2016). Meanwhile, fixed investment surged 4 percent (vs 1.8 percent in 2016), with business investment rebounding 2.4 percent (vs -0.5 percent in 2016). Net trade also contributed positively, as exports jumped 5.7 percent (vs 2.3 percent in 2016) and imports advanced 3.2 percent (vs 4.8 percent in 2016). Thus, the trade deficit narrowed to £35.488 billion from £46.912 billion in 2016.