Growth .. almost everywhere

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Last week we had a look at what the ONS estimates for 2013q4 GDP growth were likely to show. Our outlook was for another decent quarter of growth in GDP and in all the major sub-sectors. We were mostly right.

Growth was certainly on the cards, but the initial ONS estimate of 0.7% growth in the last three months of 2013 was a shade lower than the 0.8% we were predicting. Still - there are plenty of reasons why this is pretty positive; here's three:

  • No more talk of double-dips, the UK has now seen four consecutive quarters of expansion for the first time in over three years.
  • The annual rate of GDP growth in 2013 - 1.9% - was the best since 2007.
  • 0.7% growth takes us another step towards pre-crisis levels of output, which the economy should return to by 2014q2.

Manufacturing expands 0.9%

In the previous couple of quarters official statistics had indicated growth in all major sectors of the economy, suggesting that the recovery was broadening out. We'd expected more of the same in the fourth quarter, but a small drop in construction output has (temporarily - these figures are particularly subject to revision) interrupted the trend of growth across the board.

The manufacturing data, however, didn't disappoint with growth of 0.9% coming in bang in line with our forecasts and EEF's upbeat Business Trends Survey responses for 2013q4.

The monthly production data for October and November had come in a bit weaker than some of the business surveys were indicating, but the latest ONS estimates imply the sector had a solid December, with growth coming in somewhere in the region of 0.8% on the month. The 2013 headline for manufacturing of a modest 0.1% contraction does conceal a rather better quarterly profile of growth. And given surveys are pointing to continued confidence amongst manufacturers about the production and orders outlook in the near term we still expect to see a fairly strong 2014 across the sector.

But...

..and there's always a but. While UK GDP looks to be within striking distance of its pre-recession peak, manufacturing still has a way to go. If recent trends are maintained, manufacturing output should be back to where it was at the end of 2007 by 2016q2.

% quarter on quarter change in output

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Chief Economist

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