UK GDP growth is set to slow to a quarterly rate of 0.3% in 2018Q4

14-Jan-2019

UK GDP growth is set to slow to a quarterly rate of 0.3% in 2018Q4 from 0.6% in the previous quarter but a modest recovery is expected in 2019Q1

Figure 1: UK GDP growth (3 months on previous 3 months, percent) 


Source: NIESR, ONS

Note: the solid bars show the 3m/3m growth rate for complete calendar quarters and the shaded areas show rolling 3m/3m growth rate for the intervening months. There may be inconsistencies in the growth rate arising from rounding.

Main points

UK economic growth looks set to slow to a quarterly rate of 0.3% in the fourth quarter of 2018 from 0.6% in the third quarter.  This profile is marginally lower than the 0.4%  that we had published last month and points to GDP growth of 1.5% in 2018. 

According to our forecast, growth in the final quarter is driven by the service and construction sectors. The slowdown in the manufacturing sector explains most of the weakness in fourth quarter output. 

We expect economic growth to recover modestly in the first quarter of this year to 0.4%, but the risks to our forecast are skewed to the downside because of uncertainty related to Brexit. 

Amit Kara, head of UK macroeconomic forecasting at NIESR, said “The latest data confirm that UK GDP growth is slowing in the final quarter of last year. Activity is set to ease to 0.3% over this period, which is slightly below potential. The slowdown comes alongside a general softening in global activity and is therefore, not entirely attributable to uncertainty caused by Brexit. Growth is being driven by the non-retail service sector and construction sectors. Manufacturing output growth appears to have contracted sharply over this period. 

Looking ahead, we see economic growth recover to 0.4% in the first quarter of this year mainly because output in the manufacturing sector stabilises. The risks to our forecasts however, are tilted to the downside because of Brexit.”