Investment Clock insights

The UK economy slows in 2018…and contracts in December


Melanie Baker

11 February 2019

Over 2018, the UK economy grew only 1.4%, the weakest since 2009.  After recording a decent pace growth in Q3, the UK economy slowed again in Q4 and data (so far) suggests a further slowing is a reasonable probability for Q1. The business investment picture remains consistent with the idea that Brexit uncertainty is acting as a significant drag on UK growth.

Headline GDP growth was 0.2% in Q4 – a touch weaker than consensus expected. However, in December the economy contracted 0.4% (after growing 0.2% in November).  Services, construction and industrial production contracted in December and the data therefore implies a weak ramp into Q1 2019. 

Looking at the details of the Q4 number, private consumption held up relatively well, growing 0.4%  (only a touch slower than Q3).  Government spending looks to have been a surprisingly strong contributor to Q4 growth, with fixed investment more of a drag than expected. This includes yet another contraction in business investment which shrank 1.4% -and net exports a drag on GDP growth. 

Source: Thomson Reuters Datastream as at 31/12/2018

Source: Thomson Reuters Datastream as at 15/11/2018

Past performance is no guide to the future. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.