The UK economy grew by 0.5 percent on quarter in the first three months of 2019, accelerating from a 0.2 percent expansion in the previous period and matching market expectations, a preliminary estimate showed. Private consumption, government spending and gross capital formation contributed positively, while net trade contributed negatively to GDP growth.
Household consumption growth accelerated to 0.7 percent in the first three months of 2019 from 0.3 percent in the previous quarter. However, external evidence points towards continued weakness in consumer demand, as "uncertainty about Brexit and the wider economy weighed on spending" according to the latest Bank of England Agents’ Summary of Business Conditions, while the GfK Consumer Confidence index remained unchanged at negative 13 in March 2019, below its long-run average. Government expenditure increased by 1.4 percent, following growth of 1.3 percent in Q4 2018, boosted by spending on a number of areas including health and other functions of central government, such as general public services and economic affairs.
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Gross fixed capital formation (GFCF) increased by 2.1 percent in the first three months of 2019, rebounding from a 0.6 percent drop in Q4, mainly reflecting the 8.1 percent increase in general government investment due to increases across a number of central government departments. Business investment grew by 0.5 percent in the first quarter of 2019, after four consecutive quarters of decline, driven by higher investment in IT equipment and other machinery and equipment. There was also an increase of £5.2 billion in stocks being held by UK companies in the most recent quarter.
The UK trade deficit widened to £17.51 billion, the widest deficit in more than 50 years. Exports were flat, while import volumes increased by 6.8 percent, largely a reflection of the volume of imports of unspecified goods, which includes non-monetary gold (NMG). Trade in goods exports grew by 4.5 percent, reflecting increases in machinery and transport equipment and miscellaneous manufactures, while trade in services exports fell by an offsetting 5.0 percent due to falls in telecommunications, computer and information technology, intellectual property and other business services. The rise in imports reflects a 11 percent increase in trade in goods imports, partially offset by a 4.4 percent fall in trade in services imports.
On the production side, industrial output increased by 1.4 percent in the first quarter, rebounding from a 0.8 percent contraction in Q4, within which manufacturing output increased by 2.2 percent (vs -0.7 percent in Q4). Services output growth slowed to 0.3 percent from 0.5 percent, while construction output increased by 1 percent, compared to a 0.5 percent fall in Q4. Output of the agriculture, forestry and fishing sector fell by 1.8 percent (vs 0.6 percent in Q4), providing the only negative contribution to growth.