UK GDP grinds higher thanks to services and the film industry

Today brings us up to date in terms of official data on the performance of the UK economy in the first half of 2017. Whilst expectations are low rather than stellar the last week or so has brought a little more optimistic tinge to things. This started with the retail sales numbers last week. From last Thursday.

In the 3 months to June 2017, the quantity bought (volume) in the retail industry is estimated to have increased by 1.5%, with increases seen across all store types…….Compared with May 2017, the quantity bought increased by 0.6%, with non-food stores providing the main contribution.

This contrasted with the fall of a similar amount seen in the first quarter of the year which meant that we got back to levels seen at the end of 2016 or around 2.6% higher than in the second quarter last year.

This was added to by better news on the tourism front albeit for only some of the latest quarter.

For the period March to May 2017, spend in the UK by overseas residents increased 14% on the previous year to £5.6 billion………During the period March to May 2017, there were 2% more visits abroad by UK residents compared with the corresponding period a year earlier, and they spent 1% more on these visits

So whilst there was still a considerable trade deficit it did shrink a bit compared to last year as we presumably see a beneficial impact of a lower exchange rate for the pound.

Manufacturing

Yesterday came news from the Confederation of British Industry that the manufacturing was in pretty good shape.

Production among UK manufacturers grew at the fastest pace since January 1995 in the three months to July, according to the latest quarterly CBI Industrial Trends Survey……….Output growth is expected to continue to grow strongly in the quarter ahead and manufacturers are upbeat about prospects for overall demand. Domestic orders are expected to continue growing strongly, while expectations for growth in export orders improved to a four-decade high

This was upbeat as you can see and came with positive expectations from all of employment, investment and exports. It also came with some better inflation news.

Meanwhile, input cost pressures cooled in the quarter to July and are expected to soften further in the near-term, while factory gate price inflation is also expected to be more subdued.

This poses a few questions as whilst this is to some extent consistent with the Markit PMI business survey although it was more subdued and had a fading in June. It is much less in line with the official data which has shown only a little growth up to May.

Mini

There was some good news on the production front here as well. From City-AM.

A fully-electric version of the Mini is to be built at BMW’s plant at Cowley, in Oxford, the car firm has announced.

Actually whilst good news it is more accurate to say that it will be assembled there. Also in the light of the announcement that sales of petrol and diesel cars will be banned from 2040 it was interesting to see that BMW is heading down that road to at least some extent.

By 2025, BMW expects electric vehicles to make up between 15 and 25 per cent of sales. It currently produces electric models at 10 plants worldwide.

Today’s GDP Data

Here we go.

UK gross domestic product (GDP) was estimated to have increased by 0.3% in Quarter 2 (Apr to June) 2017.

So some but not a lot and it was driven by a very familiar sector.

The growth in Quarter 2 2017 was driven by services, which grew by 0.5% compared with 0.1% growth in Quarter 1 (Jan to Mar) 2017.

As I regularly point out this sector must be 80% of our economy by now as again and again it grows faster than the other sectors.

The services aggregate was the main driver to the growth in GDP, contributing 0.42 percentage points. Production and construction recorded falls in Quarter 2 2017 of 0.4% and 0.9% respectively, each contributing negative 0.06 percentage points to GDP.

This had an interesting corollary though.

Construction and manufacturing were the largest downward pulls on quarterly GDP growth, following 2 consecutive quarters of growth.

As I have noted above this is very different from the “Production among UK manufacturers grew at the fastest pace since January 1995 ” of the CBI and the growth recorded in the Markit business surveys. I note that Chris Williamson of the latter has been on the wires.

ONS say economy grew 0.3% in Q2, but & output fell 0.5% & 0.9% respectively. These likely to be revised higher.

Regular readers will be aware of my particular doubts about the official data on the UK’s construction sector although there was an interesting reply from the Mayor of West Yorkshire who said that elections always cause slow downs as people wait for the result.

The Film industry

There was good news on this front.

The second largest contributor was motion picture activities, which grew by 8.2% and contributed 0.07 percentage points to GDP growth….. Motion picture activities are a subset of the transport, storage and communications sector, which grew by 1.0%.

Actually only a couple of weeks or so ago Albert Bridge was closed for filming at the weekend and yesterday I noted filming taking place in Battersea Park. This is of course purely anecdotal but this sector has been mentioned in GDP despatches before in recent times. For more information we get referred to the BFI website which does not have the numbers until tomorrow but the ones for the first quarter were strong and perhaps provide a guide.

The total UK spend and budget of these films was £747 million and £983 million respectively, a substantial increase from UK spend of £231 million and total budget of £318 million in Q1 2017. UK spend, as a percentage of budget, was the highest since 2013, at 76%.

The only cloud in this silver lining is that we may have to start being more tolerant of some of the extraordinary statements made by luvvies, excuse me I mean economic miracle workers.

Comment

So the UK economy is grinding on in a slow way as we see the annual rate of growth fall to 1.7%. Also the news from looking at the data on a more personal level shows the minimum rate of growth possible.

GDP per head was estimated to have increased by 0.1% during Quarter 2 2017.

We also learn that the first quarter may not have been the type of statistical quirk we see regularly from the US but of course much more data will be needed for us to be sure of that.

On the more positive side this was always going to be the awkward period after the EU leave vote as higher inflation from the Pound’s fall causes not only lower real wage growth but actual falls.

Real earnings declined despite historically low unemployment. Adjusted for inflation, average weekly earnings fell by 0.7% including bonuses and by 0.5% excluding bonuses, over the year ( to May). For total real pay (including bonuses) this is the largest 3-month average year-on-year decrease since the 3 months to August 2014.

Also the film industry numbers make me wonder about the UK football premiership where the numbers are ballooning but the latest update I can find is this from E&Y.

The Premier League and its Clubs together generated over £6.2 billion in economic output that contributed approximately £3.4 billion to national GDP in 2013/14.

Surely there has been a fair bit of growth? Although of course the flow of money in then sees a flow of money out in transfer fees. Some are claiming that so far this year the defence budget of Manchester City exceeds that of around 25 countries.

 

 

 

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18 thoughts on “UK GDP grinds higher thanks to services and the film industry

  1. It’s weird how for much of the last decade most CB’s in the world have been actively pursuing lower currencies not only to generate inflation but also to create export led growth.

    It looks like it’s happening but then the sheer scale of the services sector means that some painful rebalancing is inbound.

    One look at the estate agency sector and it’s sheer size in terms of employment,does have you wondering how it’ll handle both the move to Online sales and the reduction in fees.I’ve personally seen national chains offering fixed cost deals that compete with online offers……from their local branches(with associated costs).

    Interesting times.

    • Dutch, you raise a valid point. I mean who needs estate agents? However in a perverse irony a large percentage of residential sales advertising in London is actively withdrawn from “online markets” since the current owners don’t like price discovery in a falling market. They are apparently appointing humans to seek and evalute interest from buyers in opaque 121 conversations. Still a job for those sharp suits then?

    • They really useless EA’s will move into employment agency work, the ultimate in being a scrounging useless parasite and one of the biggest growth industry for employment in the UK in the last 2 decades. (5yrs extra education is needed to do this job FFS)

      Spect the better ones will do something less parasitic like going on the dole and live off the state.

  2. no error bars for the GDP figure -that figures 🙂

    high paid EA replaced by online form/engine

    AI again takes another highly taxable job and its replaced with nowt

    and of course there’s fuel duty too – pay per mile must be forced on us or loose 40 billion ?

    the GDP figure is of course fiction , along with RPI and CPI , is it no wonder HMG cannot raise revenues ?

    that’s the real bug bear here, if the tax base shrinks , what do you do?

    print money ? ah , QE was to save the Banks ……….

    I feel the tide might be going out again

    Forbn

    • Hi Forbin

      Is the tide always on the way out these days? As to your point a proper statistical analysis would say that it is a bit more likely that we had some growth in Q2 compared to Q1. In reality 0.3% and 0.2% get quoted as pretty much gospel.

      To a question you often ask but someone else did this time it is hard to pin down the sex and drugs element as the database has categories for “recreation and entertainment” but a larger and therefore more likely candidate of “other personal services”. It would be nice to think someone has a sense of humour and is spoofing the film title for the latter category.

  3. Shaun, apologies that my question is only topical in a roundabout way however I am interested to tap into the knowledge of commentators on this site. The government has announced that all sales of cars will be electric from 2040 but I wonder if they have thought this through? Are they doing another ‘diesel number’ on us? Having done only a half an hours research it strikes me that the supply of lithium and cobalt used in these batteries is insufficient to meet this sort of demand and then there is a the question of charging them. I am not sure if local distribution networks are up to the task of millions of cars being plugged in when their owners return from work. I have also read that we would need another 10 nuclear power stations equivalent to Hinckley point to provide the power. Knowing what a bureaucratic nightmare getting only one underway has been, combined with the cost and lead time, do they really think we will be ready for this? The expenditure for such projects will be enormous and, as we appear to have little indigenous expertise, the effect on the balance of payments would not be great. Of course there is the offset of reduced oil imports. I wonder if anyone has crunched any numbers on this? Any comments would be welcome as I have doubts (again) on just how well thought out this pronouncement is. And what would it do for future GDP?

    • I wonder if they have thought this through?

      I don’t , it’s all hope and fudge.

      more generation is needed for this , a lot more . mostly CCGG backed . do we keep a good stock of Nat Gas

      ummm….

      anyway it ‘ll all be on someone else’s shift so they don’t care

      the subject can be internet searched but the figures don’t look good

      Forbin

    • Nuclear power stations are difficult to throttle – nearly constant output overnight when traditionally there is smaller demand. This suggests that motorists will be able to charge in the small hours. In sunny locations, garage/car port roof solar panels can provide power – though the car may not be home when they are charging.

      The current battery technology leaves much to be desired, ranges are inadequate and batteries suffer degraded performance in sub-zero temperatures. This will have a major impact in much of continental Europe, and much of North America.

      There should be opportunity for cars to cupple up on long distance motorway travel and have some sort of train arrangement and or charging arrangement. Autonomous cars will allow many disruptive business practices, and I expect revolutionary change by 2040

    • Hi Pavlaki
      Firstly I don’t think this pronouncement is anything more
      than PRBS.
      As a pair of absolute Petrolheads, my son (electronic}
      and myself (mechanical ) were in our version of heaven
      for four days at Silverstone and had many beer induced
      discussions about future propulsion systems. We both
      agreed that unless there is an amazing development
      using easily available, and cheap materials then battery
      power on present knowledge is not viable. Hydrogen
      with all its harvesting and storage problems might be an
      answer and could ,in theory, be used in adapted 2 or
      4stroke engines (see Honda) cold fusion, or indeed
      any manmade fusion could be the answer but we
      concluded that we need some bright spark to think of
      something so simple and brilliant that will quickly change
      everything..
      Finally as my three score years and ten are almost gone
      I would love to see what happens!

    • Interesting set of questions Pavlaki.

      My own instincts tell me they’ve not really thought this through.We’re close to the edge of electrical production each winter by all accounts.

      • that is an interesting link. Unfortunately Cobalt appears to be mined only in the Congo at the moment and supplies scarcely meet demand as it is. As to power generation, the more i have read the less I think that this is going to happen. I will bet that there will be quite a bit of discussion in the press about this subject!

    • Pavlaki, I follow this kind of thing. There is a new LICo cell dimension which increases capacity in storage volume termed 2170 with little packaging increase. You will see a range of rechargeable products boasting 25% more power for the same size, The Tesla gigafactory makes this new cell format. Interestingly these relatively small cell sizes are advantageous in temperature management in fast charge discharge cycles, previoulsy derided as laptop batteries and they still are! I was nearly interviewed for a job with Tesla.

      All that said these are just incremental improvements to a historic battery technology. These cells will serve the next 2-3 years not 23 years. Expect solid state batteries or different cell formats/cheinstries to deliver a doubling in energy density in 10 years. Still you might argue that these developments are still not sufficient to equal IC engine convenience.

      The Govt. are truly incompetent, so this announcement is just BS for a cabinet under extreme pressure. As you highlight the REDS and BLUES both chose diesel even though they all knew it was a air pollution disaster. Can you now even remotely trust them? Esp. following the “high-rise burning”, again where Govt RED & BLUE both agreed to implement flawed BuildingRegs despite warnings from the Fire Service.

      My solution will be my own solar panels, my own home storage , my own vehicle charging. My way 🙂

      Paul C

    • Working in the public sector, I would say that a lot of Govt policies are not thought through in any detail and are unachievable as a result (electric meters for example because the time scale for implementation was barely long enough to work out what we would like them to do, let alone design and install the infrastucture so we ended up getting dumb terminals for a lot of expense).

      In the Govt’s defence, at least this sets an end point that industry (car, electric grid, home storage) can work towards. And in the book Sustainable Energy Without the Hot Air (highly recommended and free here https://www.withouthotair.com/download.html) the author envisages electric car batteries buying and selling energy to the grid when on charge, to iron out fluctuations in renewable energy supply.

      Will it work and make the world better? Ask me again in 2040!

  4. I don’t think the GDP figures would have looked so under the previous measurement system. Not surprising to see Film industry included as those figures are most famously misrepresented. Perhaps is the recent inclusion of prostitution that’s really made the difference….

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