This morning has brought some welcome news for the UK.
UK gross domestic product (GDP) is estimated to have increased by 0.7% in Quarter 1 (Jan to Mar) 2024, revised up from a first estimate increase of 0.6%.
So an upwards revision and it means that the UK was in fact the leader of the pack in G-7 terms. From Faisal Islam of the BBC.
UK +0.7%
Canada +0.6%
US +0.4%
Italy +0.3%
France +0.2%
Germany +0.2%
Japan-0.5%
The news had Faisal a little confused as Statistics Canada seem to think they were joint second with the US at 0.4%. The better news is welcome although regular readers will be aware that via problems with the seasonal adjustment for Retail Sales I believe we did better at the end of last year and not quite as well in January as the official releases show.
This follows falls in the previous two quarters .
In fact 2023 was rather a disappointment.
As explained in our previous release, UK GDP is estimated to have increased by 0.1% in 2023, following growth of 4.3% in 2022.
Number Crunching
If one looks into the release there is an issue I frequently raise as a confirmation that these numbers are not as accurate as they are precise. There are three ways of measuring GDP and they gave different results for 2023. In fact one of them is rather different.
Output GDP 0.3%
Expenditure GDP 0.4%
Income GDP -0.4%
None of them are fully complete but there are reasons to think that the Income GDP version is the least complete.
In the income approach, we do not have up-to-date quarterly information on the gross trading profits of businesses as these data are collected from HM Revenue and Customs (HMRC) and are available with a lag of approximately two years.
Also this is another area affected by the problems with the labour market survey which has had response rates as low as 10% for some areas.
There is currently more uncertainty around the compensation of employees’ figures in this publication because of lower response rates in the Labour Force Survey. We have used additional information from our Pay As You Earn Real Time Information bulletin to help inform the estimates.
I have added the PAYE bit because those who follow my analysis of the wages numbers will know it is far from a perfect guide to what happens next in the average earnings series.
On that basis you may be a little surprised that we end up with an estimate of 0.1% for the year, especially as the output numbers are usually primus inter pares.
What changed in the first quarter?
It was a case of “same as it ever was” if we look at it in terms of Talking Heads lyrics.
The growth in the latest quarter was driven by a 0.8% increase in services output (revised from a 0.7% increase) and 0.6% increase in production (revised from a 0.8% increase).
Or to put it another way it was yet another bad set of numbers for the rebalancing claims for the former Bank of England Governor and now Baron King of Lothbury. It was driven by this.
The largest contributor to the growth in services output was a 1.8% increase in the professional, scientific and technical activities subsector. This was largely driven by growth of 7.2% in scientific research and development, and growth of 3.3% in legal activities.
The revision for professional and scientific activities was of the order of around 40% so a big change there. There were also strong upwards revisions for the repair of motor vehicles and bikes ( around a third) and one of 20% for transportation and storage although the latter category seems to be in flux at the moment.
there was strong growth in February 2024 where Monthly Business Survey data showed strength in the land transport services industry. Reclassifications into this industry, previously allocated in the wholesale trade excluding motor vehicles and motorcycles industry, also contributed to the strong growth.
Not everything was revised up as a usual strength for the UK economy, finance, was revised lower from flat to an impact of-0.03.
Production
The bad news for the rebalancing theory continued here.
The production sector revision is because of a downward revision in the manufacturing subsector, which is now estimated to have increased by 1.1% (previously 1.4%).
Of the number above more than half (0.17) of the downwards revision came here.
The largest positive contributor was a 4.6% increase in the manufacture of transport equipment, which has grown for six consecutive quarters.
So slower growth than thought before. Most of the rest of the decline came from other manufacturing and repair which had quite a downwards revision from a 0.14 contribution to manufacturing growth to 0.05. Frankly the early estimate in this area was rather poor.
Construction
By its standards this was not a large change.
Construction output is estimated to have fallen by 0.6% in Quarter 1 2024, revised up from a first estimate fall of 0.9%, mainly because of upward revisions in new work.
Wages
There was some interesting detail here which caught my eye.
Nominal gross domestic product (GDP) increased by 1.6% in Quarter 1 (Jan to Mar) 2024, revised up from a previous estimate of 1.2%.
At first I was wondering about an upwards revision to inflation as only a quarter of this was real economic growth. But looking deeper there is this.
Compensation of employees increased by 1.2% in the latest quarter, revised up from a first estimate increase of 0.2%. The upward revision was driven by wages and salaries, which is now estimated to have increased by 1.0% (previously 0.7%) and employers’ social contributions, which is now estimated to have increased by 2.2% (previously a 2.2% fall).
The part I have highlighted makes me wonder if someone put the minus sign in by mistake? But also we see upwards revisions to earnings which I think reinforces my point earlier about the reliability of the Income version of UK GDP.
There is currently more uncertainty around the wages and salaries figures in this publication because of lower response rates in the Labour Force Survey.
Comment
The better news from the UK also flowed into the per head numbers.
Real GDP per head is estimated to have increased by 0.5% in Quarter 1 2024 (revised from an increase of 0.4%), following seven consecutive quarters without positive growth. It is estimated to be 0.6% lower compared with the same quarter a year ago.
But as you can see we will need another quarter like this to simply get back to where we were this time last year. As we have had quite a lot of immigration this questions the many claims that it makes us better off because the per capita GDP figures have told a different story. The overall picture has turned from decline to growth albeit thin pickings.
GDP is estimated to have increased by 0.3% in Quarter 1 2024 compared with the same quarter a year ago.
On the other side of the coin it has not been a good run for the Bank of England whose forecasting arrow will have missed the target and perhaps had the crowd ducking for cover.
GDP is projected to increase by 0.1% in 2024 Q1 and at a similar pace over the following few quarters, slightly stronger rates than expected in the November Report.
Notayesmanseconomics's Blog 
Great stuff on GDP but as we look forward things could change quickly if Labour get in interest rates may not fall as much as some think.
Things are that great the BOE warns there could be a stock market correction…
Get ready for a stock market correction, says the Bank of England (msn.com)
Hi Peter and thanks for the link.
I found it a little curious on the issue of bonds.
“The prices of many assets such as shares and bonds remain high relative to historical norms, and some have continued to rise...[Investors] are placing less weight on risks, such as geopolitical developments or continued high inflation…These risks make it more likely that there could be a sharp correction in asset prices.”
Seeing as they lost 32-33% on the bonds that they sold this Monday ( 2035/36 maturities). that means that they think they bought UK bonds at extraordinarily high levels. A bit of a confession there.
Still with their track record on predictions….
Russia’s Q1 2024 growth was 5.4%
Hi therrawbuzzin
The issue of the GDP of Russia is that it starts from such a relatively low base.
Not on a PPP basis, the World Bank now rank it as 4th largest, ahead of Japan.
But of course that does not fit ‘the narrative’ so is ignored as everyone ‘knows’ its just an oil field masquerading as a country’ and its now a ‘war economy’ and Putin does nothing but pour over battle plans in his evil lair, etc etc etc.
With the FTSE above 8000 the stock market is due a revision anyway regardless of who gets elected, these pretty stories of economic improvement haven’t reached my distant northern shores. It’s the just about managing group that I notice, as it includes me. We used to be relatively well off now we’re in the JAM’s.
Living standards have been clobbered and it’s going to take time to claw it all back if it ever is.
The rich cannot take any more from the working class; they are really not managing any more, & to try would lead to insurrection, so they come for your wealth next.
What did the middle-classes expect?
It just shows how great our country could be if the government and Bank of England were taken out of the equation, despite all their best efforts, things seem to be improving – imagine what it would be like if free markets and real money were re-introduced.
We could be very prosperous.
We could afford free winter heating for over 70s if we used the gazillions of cubic metres of gas West of Shetland, instead of worrying about being more than 1.5C above Little Ice Age temps (We did not fully emerge from LIA until1890), & just who claims that was the ideal climate anyway?
We could perhaps even try our hands at manufacturing! Who knows?
We could make enough fertiliser to return profit from food production to sustain farming, rather than taking land out of food production with hare-brained, deliberately destructive schemes?
We might even be well off enough to train our own medical staff, instead of robbing the developing World for theirs?
The working class might even be able to afford heat & nutrition!!!
The problem is not “managed decline,” it’s planned decline, for no reason other than the upwards movement of wealth & power.
Great blog as usual, Shaun. And congratulations to Britain on being on top of the G7 GDP growth table. Also, thank you for putting Canada ahead of the US, based on the 0.6% quarterly growth rate of our GDP by industry series, which was just updated to April 2024 today. The quarterly GDP by expenditures series does show a 0.4% growth rate, which would tie it with the US. In any case, California governor was exaggerating a tad in the post-presidential debate analysis last night talking about how US growth is the envy of the whole world. You have just shown that it isn’t even the envy of the whole G7. And, based on Alan’s comment, Russia had the highest growth rate in the G8, so if you make that your focus, the US just shares the mediocrity award for growth with Italy.
The April 2024 growth rate for Canada was 0.3%, consistent with last month’s preliminary estimate. And the preliminary estimate for May is for 0.1% growth. Doug Porter of BMO Capital Markets wrote: “The two months combined put Q2 on track for nearly 2% annualized growth, which is a bit stronger than the BoC’s (and our) 1.5% call for the quarter.” Doug is talking about quarter-on-quarter growth, not June to September, but I think he is a little low, as I calculated the annualized growth rate would come out to 2.05%.
A big component of the growth comes from the Alberta oil sands, which would be gearing up production for the opening of the Keystone XL pipeline in May. This would obviously also have helped GDP growth in May. StatsCan notes: “The arts, entertainment and recreation sector (+0.9%) rose for the second consecutive month in April. Contributing the most to the growth in April was an increase in spectator sports as four Canadian hockey teams qualified for the National Hockey League playoffs that started in the second half of the month.” Sadly, these playoff teams did not include the Ottawa Senators. However, they did include the marvellous Edmonton Oilers, whose comeback fell just short of winning them the Stanley Cup, but thrilled millions of Canadian fans.
Hi Andrew and thank you
National Statistics bodies seem much more concerned with recreation and sports events these days. The UK will no doubt be looking at “Swiftonomics” with Taylor having just been in the UK and coming back in August. I would hope that someone would try to figure out how much of the rise in ticket and hotel prices is really inflation but I think we both know the answer to that.
Anyway is Canadian ice hockey on the rise?
Thank you for your reply, Shaun.
Yes, the economic analysis of sports is a fascinating subject. I am very interested in seasonal goods in consumer price indices, and for city consumer price indices, seasonal weighting, say for admission to professional hockey games is problematic, since the very length of the season depends a lot on whether a team makes the playoffs and how far it goes if it makes them. For this kind of a seasonal good there are real advantages to the use of the Balk formula over the Rothwell formula since only the former allows the in-season months to end in April one year and June the next.
Ice hockey is struggling in Canada as a participation sport. I was never good at it but I played it in school as part of the physical education program. My stepson Miroslav never played hockey, although he does know how to skate. He was quite a good water polo player, although at least for now he isn’t playing anymore. Here is a link to a report on the decline:
https://toronto.citynews.ca/2024/06/11/steady-decline-in-youth-hockey-participation-in-canada-raises-alarm-about-the-future-of-the-sport/
One encouraging sign the report notes is that hockey continues to be the preferred sport for First Nations people in Canada. It would be nice to see the numbers pick up again, but Canada isn’t defined by hockey anymore than England is defined by football.