GDP estimate understates true momentum

  •  GDP growth in Q1 2015 was 0.3%, down from 0.6% in Q4 2014
  • Services output rose by 0.5% in Q1, while construction fell by 1.6% and production eased by 0.1%
  • GDP in Q1 2015 was 2.4% higher than a year earlier, and 4.0% higher than the pre-recession peak in 2008

Commenting on the GDP figures for Q1 2015, published today by the ONS, David Kern, Chief Economist of the British Chambers of Commerce said:

“Although we expected a slowdown in GDP growth, following weak construction and production figures, the scale of the decline estimated by the ONS understates the true momentum in the economy. It is likely that the services sector rose by more than 0.5% – in particular we are sceptical that business and financial services output was broadly flat in the quarter. It would not be surprising if this estimate was upgraded in due course.

“Despite these disappointing figures, economic output is almost 2.5% higher than a year earlier and 4.0% larger than before the recession. However, there is no room for complacency. The incoming government must work to foster the growth aspirations of businesses, helping the UK economy achieve sustained growth.”

David Bharier, BCC Business Insight Manager said:

“The BCC’s Quarterly Economic Survey (QES) has historically been an accurate indicator of future movements in GDP growth. In Q1 2015, the QES manufacturing sales index anticipated the slowdown in the GDP growth rate. However, not at the size of today’s estimate by the ONS.

“The manufacturing sales balance fell from +36% in Q4 2014 to +30% in Q1 2015, while GDP growth fell from 0.6% to 0.3% in the same timeframe. Similarly, the service sector sales balance eased by four points to +34% in Q1 2015, but still remained higher than the manufacturing sales index.”