Today brings a torrent of UK economic data bringing us up to the end of the first quarter of this year. Actually this particular “theme day” provides too many numbers and data points to be analysed in one go and is another in a sadly long list of examples of our national statisticians barking up the wrong tree. Moving to the numbers themselves this morning’s news has already unwittingly provided its own critique. From the BBC.
A replacement for how Britain’s emergency services communicate is set to go over budget by at least £3.1bn, a spending watchdog has warned.
The Home Office has already delayed switching off the existing system by three years to 2022.
But the National Audit Office (NAO) has raised doubts about whether the project will be ready by then
We observe another in a growing list of IT infrastructure projects for the NHS which are both late and way over budget. The track record is so poor that we may end up being grateful it works at all, assuming it does. But here is the GDP link because that extra £3.1 billion is likely to go straight to the future UK GDP bottom line in an example of us being worse off but it being recorded as a gain. That is the problem with using a measure which counts spending as an automatic gain rather than a type of inflation.
On a more technical level I looked at the area of the public-sector and GDP a few years back when I provided some technical advice to Pete Comley for his book on inflation. He had investigated the deflator ( inflation measure) used for GDP in the public-sector and found it to have more holes than a Swiss cheese.
This week has seen some extraordinary progress into the Champions League and Europa League finals but what is it worth in economic terms? @SwissRamble has produced some estimates.
Due to the significant increase (around 50%) in Champions League revenue in 2018/19, all English clubs will earn much more than prior season (2017/18 comparatives in brackets). As it stands:
#LFC €107m (€81m)
#THFC €102m (€61m)
#MCFC €93m (€64m) #MUFC €93m (€40m)
As you can see it was a good year to do well as there is much more money in it and for those of you wondering why Liverpool and Spurs have not done much better than the two Manchester clubs it is because Manchester City got more out of the TV pool and because of a coefficient based on the last 10 years.
Mind you with the inflation in the price of players that total represents what you might pay for a world-class one. As a Chelsea fan I await the Europa League update with particular enthusiasm.
Former Bank of England Governor Baron King of Lothbury must be very disappointed that he missed an opportunity to shout “rebalancing” from the rooftops as we were told this in the GDP report.
driven by growth of 2.2% in manufacturing output.
If we look for some detail we see this.
The quarterly increase of 2.2% in manufacturing is due mainly to rises of 9.4% from pharmaceuticals, 2.7% from food products, beverages and tobacco, and 3.2% from metals and metal products.
The first sector is hard to read because we know form past research that the UK pharmaceutical sector has erratic output levels that do not conform to monthly and sometimes quarterly timetables. As to the others I guess maybe nicotine addicts were stockpiling against the horrible fear of going cold-turkey!
Returning to the GDP numbers we see that production gave it a tug upwards.
Production output rose by 1.4% in Quarter 1 (Jan to Mar) 2019, compared with Quarter 4 (Oct to Dec) 2018, due to rises from manufacturing, and mining and quarrying.
There was a minor curiosity in this as we wonder who was getting ready for war?
basic metals and metal products (3.2%), driven by monthly strength during January 2019 from the weapons and ammunition subindustry, which increased by 25.5%.
Continuing our rebalancing journey the usual suspect for UK economic growth was taking something of a breather.
Growth in the services sector slowed to 0.3% in the latest quarter,
The slow down was particularly marked in these areas.
Professional, scientific and technical activities fell by 0.6% in Quarter 1 2019. However, this decrease broadly reflects a fallback following particularly strong growth throughout the second half of 2018. In addition, financial and insurance services output continued to fall in Quarter 1 2019, decreasing by 0.4%. The quarterly fall predominantly reflected a fall in financial service activities, which has not contributed positively to growth since Quarter 1 2017.
Moving to the headline number there was some good news.
UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.5% in Quarter 1 (Jan to Mar) 2019 having slowed to 0.2% growth in the previous quarter.
If we take this in round numbers terms we see that a combination of production and construction which rose by 1% pulled us up from 0.3% growth to 0.5%. Just addressing the construction numbers they do seem to coincide with my Battersea Dogs Home to Vauxhall crane count of 49 but the official series remains troubled.
The annual picture improved too.
In comparison with the same quarter a year ago UK GDP increased by 1.8% to Quarter 1 (Jan to Mar) 2019; up from 1.4% in the previous period.
This all happened in spite of this.
Monthly GDP growth was negative 0.1% in March 2019, as the services and construction sectors contracted.
This is a more complex issue than some would like to think and indeed have already claimed. Let me illustrate by opening with this.
Breakdown of Q1
#GDP suggests stockbuilding added 0.7 percentage points (pp) to quarterly growth, but note that net trade – including the imports being stockpiled -subtracted 0.6pp (excl. volatile components). ( @JulianHJessop)
As you can see the lazy response is to look at the stockbuilding adding to GDP forgetting that a lot of it was probably imported.
Our usual problem was added to by the increase in imports and thus turned into quite a subtraction from the numbers.
The total trade deficit (goods and services) widened £8.9 billion to £18.3 billion in the three months to March 2019, as the trade in goods deficit widened £6.4 billion to £43.3 billion and the trade in services surplus narrowed £2.5 billion to £25.0 billion.
There are several issues with this. As I regularly point out we have very little idea of our services trade data which tends to be fleshed out a year or two after the event. Also the fact we are large custodians of and traders in gold makes discerning the true trade position even more complex.
Excluding erratic commodities, such as non-monetary gold, the total trade deficit increased £3.1 billion to £14.5 billion in the three months to March 2019.
These numbers especially the pick-up in the annual rate of GDP growth are good news for the UK. There are of course issues looking ahead and one of them seems set to be in the headlines today as the Chinese arrive to meet President Trump. The news looks bad but was there a reason why the Chinese stock market rose by more than 3% today?
Moving back to GDP then a couple of media establishment themes took a knock from the GDP breakdown. Let me start with business investment.
Following four consecutive quarters of decline throughout 2018, business investment grew by 0.5% in the first quarter of 2019, driven by higher investment in IT equipment and other machinery and equipment.
The wider concept of investment provided more food for thought.
Gross fixed capital formation (GFCF) increased by 2.1% in the first three months of 2019
And as for austerity?
Government consumption increased by 1.4% in Quarter 1 2019, following growth of 1.3% in Quarter 4 (Oct to Dec) 2018.
Pump-priming? Well they were at play in the investment ( GFCF) numbers too.
mainly reflecting the 8.1% increase in general government investment.
So perhaps the Rolling Stones summed it all up some years ago.
You can’t always get what you want
You can’t always get what you want
You can’t always get what you want
But if you try sometimes you might find
You get what you need