This morning's national accounts release shows a small downward revision to GDP data for the last quarter of 2011 and an improved current account deficit.
The key statistics
- GDP growth in Q4 2011 has been revised down to -0.3% from the previous estimate of -0.2% bringing annual GDP growth to 0.7% for 2011.
- Manufacturing output fell in Q4 by 0.7%, a lower reduction than previously reported.
- The UK current account deficit reduced to £8.5b in 2011q4 from £10.5 billion in the previous quarter on the back of strong exports during the end of 2011. Export of goods rose 4% in the last quarter reducing the trade deficit to £4 billion.
So what does this mean for the economy in the year ahead?
Last week the OBR substantially lowered their expectations around the role business investment will play in the recovery. Business investment has struggled to recover over the past few years and the hurdles of finance and uncertainty remain in 2012. Significantly more growth is now expected to come from the Household sector. In the Q4 2011 Household consumption expenditure saw a small positive contribution to growth.
Low confidence around the world continues to pose a major risk and challenge to the business environment. The uncertainty from the Eurozone will likely continue to damage demand but there are some positive signs of export growth to emerging economies. The big question is – to what extent will low worldwide confidence impact on demand over the coming year?
On a positive note, the trade figures provide some confidence that firms are responding well to the weakness from the Eurozone crisis. The strengthening Purchasing Managers Index in the first few months of 2012 also shows businesses are more positive about prospects and activity.
While these figures are not likely to materially impact the OBRs projections of future growth, they reconfirm the challenges that the UK was facing during the end of last year. The positive trade figures for 2011 offer better prospects for economic rebalancing in the year ahead.