Quick update from our colleagues at MONEYCORPS in the UK today:
UK Growth Alert
Actual Expected Previous
GDP quarterly (Q1) 0.3% 0.3% 0.2%
GDP annual (Q1) -0.2% -0.2% -3.1%
It always takes a while for the Office for National Statistics to piece together its picture of overall economic performance. That is why it undertakes the cumbersome assessment of Gross Domestic Product (GDP) only every quarter, not every month. Evidence of the task’s complexity was clear when the ONS had to postpone the release of the data because it could not reconcile the numbers.
Today’s figures eventually showed what investors had been expecting all along; the UK economy grew by 0.3% in the first three months of the year. But they also contained a surprise. Earlier estimates for the peak-to-trough decline in GDP had put the figure at -6.2%. Today’s revision updated that figure to -6.4%. There was also confirmation that, in volume terms, the 4.9% fall in calendar 2009 was a record annual drop.
Whilst this data represents just about the most backward-looking statistics in the book (in that they relate to a period that ended more than three months ago) they are the most up-to-date and accurate measure of overall economic performance that is available. Investors therefore set great store by them. They also tend to be optimistic that successive revisions will show an improving picture. In that respect, today’s numbers were a disappointment, prompting a knee-jerk sell-off for the pound.
Very quickly, however, reality kicked in and the pound set off higher. Other than that figure relating to the 2008-09 recession overall, the numbers were no worse than analysts had predicted and were better than the equivalent statistics for the euro zone (subject to revision). From here on in, the questions will centre on the impact of Chancellor Osborne’s austerity budget. Will it, as some fear, derail what is clearly a fragile recovery?