UK Economy still avoiding recession

Today’s GDP figures suggest that the UK economy has managed to avoid a recession in the first three months of this year, partly thanks to a pick-up in business investment.

The key points of the report can be summarised as follows:

• UK GDP grew by an unrevised 0.1% in the three months to March the same pace as in the previous quarter. This was in line with UK economists’ expectations.

• On the output side the small gain was mainly driven by an increase in output in the service sector which rose by 0.1% in Q1 after growth of 0.1% in the previous quarter.

• On the spending side, the gain in GDP was driven by a 2.4% rise in gross fixed capital formation (revised up from a prior estimate of 1.3%. A 3.3% climb in business investment volume was the main reason for this.

• Consumer spending volume, in contrast, was unchanged while government spending and net trade dragged output lower.

• Also published today were the June estimates of UK house prices from the Nationwide Building Society. These showed that house prices were fairly stable over the month, rising by a modest 0.1%, reversing a 0.1% m/m decline in May. On a year-on-year basis, however, prices fell by 3.5% after a 3.4% decline in May.