UK GDP contracted 1.5% in Q1: ONS

The level of GDP in the UK is now 8.7 per cent below where it was prior to the pandemic at the end of 2019, the ONS said in its estimate containing current and constant price data on the value of goods and services to indicate the economic performance of the UK.

Nominal GDP fell by 0.1 per cent in January-March 2021. Following two quarters of decline, the implied deflator increased by 1.4 per cent in Q1 2021. Compared with the same quarter a year ago, the implied GDP deflator increased by 4.8 per cent, mainly reflecting an increase in the implied price change of government consumption. The implied GDP deflator represents the broadest measure of inflation in the domestic economy, reflecting changes in the price of all goods and services that comprise GDP.

During the quarter, production output decreased by 0.4 per cent, mainly because of a 0.7 per cent fall in manufacturing. In comparison with levels before the pandemic, production is now 3.6 per cent lower while manufacturing is 3.4 per cent below Quarter 4 2019 levels, the ONS said.

According to the latest Bank of England Agents’ Summary of Business Conditions, the fall in manufacturing output was partly because of “the unwinding of stockbuilding that had taken place in late 2020 ahead of new trading arrangements with the EU coming into effect, and freight delays that had resulted in materials shortages”.

In January-March quarter, there was a decline in household consumption expenditure and gross capital formation. The increase in real government expenditure was driven by public administration and defence and health, which more than offset the fall in spending on education given school closures.

UK trade contracted further in Q 1 2021, with falls both in imports and exports of goods and services. However, the UK trade balance improved during the quarter, recording a deficit of 0.5 per cent of nominal GDP. Imports of goods fell by 15.6 per cent, mainly driven by falls in machinery and transport, miscellaneous manufactures such as clothing, and medical and pharmaceutical products. Exports of goods fell by 11.6 per cent, mainly because of decreases in fuels, chemicals, and miscellaneous manufactures.

In Q1 2021, finished manufacturing goods, as well as retail, continued experiencing an increase in inventories. This is likely caused by several factors, including late arrivals because of port issues at the end of the previous quarter, build-up because of slow economic activity in the quarter, and increases in stock in anticipation of the reopening of stores.

Fibre2Fashion News Desk (RKS)