GDP monthly estimate, UK: December 2018

Gross domestic product (GDP) measures the value of goods and services produced in the UK. It estimates the size of and growth in the economy.

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This is an accredited national statistic.

Contact:
Email James Scruton

Release date:
11 February 2019

Next release:
12 March 2019

1. UK gross domestic product (GDP) grew by 0.2% in Quarter 4 2018


Commenting on today’s GDP figures, Head of GDP Rob Kent-Smith said:

“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well.

“Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy.

“The UK’s trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row.”

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2. A large positive contribution from the services sector was partially offset by smaller negative contributions from the production and construction sectors

Growth in the services sector was 0.4% in Quarter 4 (Oct to Dec) 2018. Meanwhile, the production industries contracted by 1.1% and construction contracted by 0.3%. These growths mean that the services sector was the only positive contributor to gross domestic product (GDP) growth in Quarter 4, while the other two sectors had negative contributions (Figure 2).

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3. Rolling three-month growth slowed further to 0.2%, after growth of 0.3% in November 2018

Rolling three-month growth was 0.2% in December 2018, as the slowdown from a peak in August continued (Figure 3).

Rolling three-month growth is based on output gross value added (GVA) and therefore there will be discrepancies in the time series with our quarterly estimates of gross domestic product (GDP), which include information on the expenditure and income approaches to measuring GDP.

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4. Annual GDP growth was the lowest since 2012, at 1.4%

Headline annual gross domestic product (GDP) growth was 1.4% in 2018, the lowest it has been in six years. Meanwhile, the services sector had annual growth of 1.7%, the lowest since 2011 and the production sector had annual growth of 0.7%, the lowest since 2013. Construction annual growth was 0.6%, the lowest since 2012 (Figure 4).

A better indicator of underlying growth in GDP is the quarter on same quarter a year ago growth rate, which is broadly in line with the annual growth rate at 1.3% in Quarter 4 (Oct to Dec) 2018.

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5. GDP fell by 0.4% in December 2018

Month-on-month gross domestic product (GDP) growth was 0.2% in October and November 2018. However, monthly growth contracted by 0.4% in December 2018 (Table 1). The last time that services, production and construction all fell on the month was September 2012.

Monthly GDP estimates are much more volatile than quarterly GDP estimates, with almost one in every four months in the past 21 years showing negative GDP growth (for more information see A guide to interpreting monthly GDP). Therefore, monthly estimates should be used alongside other measures such as the three-month growth rate when looking for an indicator of the longer-term trend of the economy. However, they are useful in highlighting one-off changes that can be masked by three-month growth rates.

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6. The services sector grew by 0.4% in Quarter 4 2018

The services sector grew by 0.4% in Quarter 4 (Oct to Dec) 2018, driven by widespread growth within professional, scientific and technical activities. Real estate activities, and human health and social work activities were also notable contributors.

Figure 5 looks at notable contributions to rolling three-month growth over the past year. Wholesale and retail trade grew strongly over the summer, while professional, scientific and technical activities has remained a strong contributor throughout 2018. Information and communication was previously strong, but saw a slight fall in the three months to December 2018.

Month-on-month growth in the services sector was negative 0.2%, which was driven primarily by wholesale and retail trade. Retail trade fell from a high November (see Retail sales bulletin), while wholesale trade was affected by falling oil prices. Accommodation and food also had a negative contribution, along with administrative and support services and other service activities.

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7. Production growth fell by 1.1% in Quarter 4 2018

Growth in the production sector fell by 1.1% in Quarter 4 (Oct to Dec) 2018, as all four sub-sectors contracted. The last time all production sub-sectors contracted was Quarter 1 (Jan to Mar) 2009. It was the second consecutive three-month fall for manufacturing, as contraction in 10 of its 13 sub-industries resulted in overall growth of negative 0.9% in manufacturing.

Production fell by 0.5% in the month of December 2018, also driven by manufacturing, which contracted by 0.7%. This is the sixth consecutive monthly fall for manufacturing, which last occurred between September 2008 and February 2009. Despite this, in Quarter 3 (July to Sept) 2018 we continued to see a small increase in growth in manufacturing output of 0.2%, in part due to a weaker base period in Quarter 2 (Apr to June) 2018.

As seen in Figure 6, a long-term measure of growth in production and manufacturing highlights the decline seen over the past year, which has worsened as the year has progressed.

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8. Construction growth contracted in Quarter 4 2018, the first negative three-month growth since May 2018

Construction contracted by 0.3% in Quarter 4 (Oct to Dec) 2018 (Figure 7). Although new work grew on the quarter, this was offset by a fall in repair and maintenance.

Monthly growth in construction was negative 2.8% in December 2018, with both new work, and repair and maintenance contracting in this period.

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9. Growth in the expenditure approach to measuring GDP was 0.2% in Quarter 4 2018

Household expenditure and government expenditure both contributed positively to growth of 0.2% in gross domestic product (GDP) in Quarter 4 (Oct to Dec) 2018. Household expenditure contributed 0.27 percentage points while government expenditure contributed 0.25 percentage points.

Gross capital formation, which includes gross fixed capital formation (GFCF), changes in inventories and the acquisitions less disposals of valuables, and net trade both contributed negatively to GDP growth in the latest quarter, contributing negative 0.25 percentage points and negative 0.12 percentage points respectively (Figure 8).

More information on the expenditure and income approaches can be found in the GDP First quarterly estimate bulletin.

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10. Nominal GDP increased by 0.6% in Quarter 4 2018

Nominal gross domestic product (GDP), or GDP in current prices, grew by 0.6% in Quarter 4 (Oct to Dec) 2018, with the increase driven by a 0.9% increase in compensation of employees (CoE).

Gross operating surplus of corporations was the only component of income to contribute negatively to GDP growth in the latest quarter (Figure 9), with both CoE and other income contributions to GDP growth slowing compared with their contributions in Quarter 3 (July to Sept) 2018.

More information on the expenditure and income approaches can be found in the GDP First quarterly estimate bulletin.

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11. Things you need to know about this release

Please note that the tables associated with this release now include revisions to growth.

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12. Quality and methodology

The Gross domestic product (GDP) Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • uses and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

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Contact details for this Statistical bulletin

James Scruton
GDP@ons.gov.uk
Telephone: +44 (0)1633 455284