‘According to ONS figures, GDP grew by 0.2% in the UK between November 2018 and January 2019. This is the “rolling three-month” release that is not comparable with quarterly growth statistics in National Accounts and is a provisional figure. It is important to note that these figures are likely to be revised in the future. Since revisions normally range between 0.1 and 0.2 percentage points, we cannot make much out of the number and it should be treated with caution.
‘What the figure shows is that GDP growth held on to a similar growth rate as in the previous three months. GDP growth declined and showed a disappointing trend since August 2018, but was slightly higher than forecast by some experts. These short term forecasts, however, have large standard errors. For instance, if you forecast zero growth, and your normal margin of error is plus or minus 0.1 there is almost a 50% probability that growth turns out to be between 0 and 0.2 percent.
‘GDP growth was mostly driven by the services sector, with industry contributing negatively. This has been the case despite the fact that a weak pound should help increase international orders for manufacturing. Construction, although contributing negatively for the whole three months, experienced a positive bounce back in January driven mostly by non-housing repair and maintenance, and infrastructure.
‘Most worrying for long-run growth prospects, however, is the disappointing performance of labour productivity. This is measured as GDP per hour worked. It fell by 0.1% in the last quarter of 2018, perpetuating the long-run stagnation in productivity in the UK known as the “UK productivity puzzle”. With stronger wage growth, lower productivity growth increases labour costs leading to inflationary pressures. The Monetary Policy Committee will be watching these developments closely.’
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