GDP First Quarterly Estimate, UK: April To June 2024

Data Interpretation

Summary:

First quarterly estimate of gross domestic product (GDP). Contains current and constant price data on the value of goods and services to indicate the economic performance of the UK.

Main points

UK gross domestic product (GDP) is estimated to have increased by 0.6% in Quarter 2 (Apr to June) 2024, following an increase of 0.7% in Quarter 1 (Jan to Mar) 2024.

Compared with the same quarter a year ago, GDP is estimated to have increased by 0.9% in Quarter 2 2024.

In output terms, services grew by 0.8% on the quarter with widespread growth across the sector; this offset falls of 0.1% in both the production and construction sectors.

In expenditure terms, there were increases in gross capital formation, government consumption and household spending, partially offset by falls in net trade.

Headline GDP figures

UK real gross domestic product (GDP) is estimated to have grown by 0.6% in Quarter 2 (Apr to June) 2024, following growth of 0.7% in the previous quarter . Compared with the same quarter a year ago, real GDP is estimated to have increased by 0.9%.

Our GDP monthly estimates published today (15 August 2024) show that GDP is estimated to have shown no growth in June 2024, following unrevised growth of 0.4% in May 2024 and no growth in April 2024 (unrevised).

As well as producing estimates of GDP, the Office for National Statistics (ONS) also produces estimates of GDP per head (or per capita), which divides UK GDP by the total UK population. This is one proxy indicator of welfare, rather than production. We are also exploring a more holistic view of national progress, prosperity and well-being.

As the UK population might not be changing at the same rate as GDP, this means that growth in GDP per head can show a different trend to growth in headline GDP.

Real GDP per head is estimated to have increased by 0.3% in Quarter 2 2024 and is 0.1% lower compared with the same quarter a year ago.

Nominal GDP is estimated to have increased by 0.9% in Quarter 2 2024, mainly driven by increases in gross operating surplus of corporations, other income and compensation of employees. Compared with the same quarter a year ago, nominal GDP is estimated to have increased by 3.0%.

The implied price of GDP rose by 0.3% in Quarter 2 2024, where the increase is primarily driven by higher prices in government consumption. Compared with the same quarter a year ago, the GDP implied deflator further eased to 2.2%.

Output

Output is estimated to have grown by 0.6% in Quarter 2 (Apr to June) 2024. This follows two consecutive quarterly falls of 0.1% in Quarter 3 (July to Sept) and 0.3% in Quarter 4 (Oct to Dec) 2023 and growth of 0.7% in Quarter 1 (Jan to Mar) 2024.

The growth in the latest quarter was driven by a 0.8% increase in services output while production and construction fell on the quarter. Across Quarter 2, early estimates suggest 14 out of 20 of the subsectors grew, up from 13 the previous quarter.

Expenditure

Looking at the expenditure approach to measuring gross domestic product (GDP), there was an increase in gross capital formation, government consumption and household spending in Quarter 2 (Apr to June) 2024, partially offset by falls in net trade .

Income

Nominal gross domestic product (GDP) increased by 0.9% in Quarter 2 (Apr to June) 2024, following growth of 1.6% in the previous quarter. Growth in nominal GDP was driven by increases in gross operating surplus of corporations, other income, and compensation of employees, which offset a fall in taxes less subsidies.

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Eurostat

Data Interpretation

Economic

Overview

In June 2024, compared with May 2024, seasonally adjusted industrial production decreased by 0.1% in the euro area and remained unchanged in the EU, according to first estimates from Eurostat, the statistical office of the European Union. In May 2024, industrial production fell by 0.9% in the euro area and by 1.2% in the EU.

In June 2024, compared with June 2023, industrial production decreased by 3.9% in the euro area and by 3.2% in the EU.

Monthly comparison by main industrial grouping and by Member State

In the euro area in June 2024, compared with May 2024, industrial production increased by 0.7% for intermediate goods;increased by 1.9% for energy;increased by 0.9% for capital goods; increased by 3.8% for durable consumer goods;decreased by 2.5% for non-durable consumer goods.

In the EU, industrial production increased by 0.7% for intermediate goods;increased by 1.4% for energy;increased by 0.9% for capital goods;increased by 3.2% for durable consumer goods;decreased by 2.0% for non-durable consumer goods.

Among Member States for which data are available, the largest monthly decreases were recorded in Ireland (-7.8%), Belgium (-6.5%), Croatia and Portugal (both -3.7%). The highest increases were observed in Romania (+4.0%), Finland (+3.6%) and Slovakia (+2.1%).

Annual comparison by main industrial grouping and by Member State

In the euro area in June 2024, compared with June 2023, industrial production decreased by 1.5% for intermediate goods;increased by 2.6% for energy;decreased by 7.8% for capital goods;decreased by 2.1% for durable consumer goods;increased by 0.1% for non-durable consumer goods.

In the EU, industrial production decreased by 1.2% for intermediate goods;increased by 2.6% for energy;decreased by 7.1% for capital goods;decreased by 2.0% for durable consumer goods;increased by 0.9% for non-durable consumer goods.

Among Member States for which data are available, the largest annual decreases were recorded in Ireland (-17.4%), Croatia (-8.3%) and Latvia (-5.5%). The highest increases were observed in Greece (+9.5%), Cyprus (+8.8%) and Malta (+6.3%).

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Thomas

Economic

Political

The political turmoil unleashed by the dismissal of Thai Prime Minister Srettha Thavisin is likely to deal another blow to the already struggling economy, where millions of people drowning in debt have been waiting for long-delayed cash handouts.

Southeast Asia's second largest economy grew 1.5% in the first quarter of 2024 compared to a year earlier, slowing from the prior quarter's 1.7% expansion and lagging regional peers.

The tourism-dependent country of 66 million people has struggled to recover from the COVID-19 pandemic, and major growth engines, including an automobiles sector that is the largest in the region, are still spluttering.

Tim Leelahaphan, senior economist at Standard Chartered Bank, said the political upheaval had cast doubts about the passage of the 3.75 trillion baht ($107 billion) national budget for fiscal 2025, as well as the 500 billion baht nationwide cash handout that was a flagship Srettha policy.

"Political uncertainty and an unclear political outlook could have adverse implications for fiscal policy," he said. The caretaker deputy finance minister said on Thursday the budget would not be delayed.

Srettha's ouster by the constitutional court on Wednesday came a fortnight after his government opened registrations for a scheme to give away 10,000 baht to 50 millions Thais, a key election promise of his Pheu Thai party.

Over 16 million people had applied to receive the "digital wallet" handout on the day registrations opened, crashing the system but signalling huge demand for the controversial scheme among ordinary Thais hurting from the slowing economy and high levels of personal debt.

Household debt stood at 16.4 trillion baht, or 90.8% of GDP, at the end of March, among the highest in Asia.

The central bank, which had bickered with Srettha's administration over the scale of the handout, left its key interest rate unchanged at a more than decade-high of 2.50% for a fourth straight meeting in June.

It is expected to hold the rate again when it meets on Aug. 21.

Ballooning household debt has also hit the car industry. Thailand is home to the factories of Toyota Motor and Honda Motor, and overall production in the sector has dropped for 11 straight months into June as local sales slumped.

Exports of car and car parts also dropped 0.4% in the first half of 2024 from a year earlier, with main markets Malaysia and Vietnam down nearly 30% on the year, commerce ministry data showed.

Entrenched Uncertainty

Srettha's removal underlines the deep fissures between the conservative-royalist establishment, backed by the military, and populist parties like the Pheu Thai. Both camps have been locked in a decades-long tussle, triggering coups and bouts of unrest.

In the absence of a lasting resolution to the conflict, Thailand's long-term prospects remain uncertain, analysts say.

"Thailand has still not found a formula to bridge the country's deep political divide," said Gareth Leather, Senior Asia Economist at Capital Economics.

"Without one, uncertainty looks set to remain entrenched while economic populism is likely to become worse, with negative repercussions for investor confidence."

Thailand's stock market has been the worst performing bourse in Asia so far this year, down 9.3%.

Industrial sentiment also hit its lowest in two years in June, while consumer confidence reached an 11 month low in July.

Parliament will convene on Friday to elect a new prime minister, less than 48 hours after Srettha's dismissal.

A Pheu Thai-led 11-party alliance holds 314 house seats, allowing it elect a prime minister on Friday, providing the coalition remains intact.

While on the streets Bangkok there is calm, analysts say the ongoing political drama could raise the risk of unrest. For now, some Thais are simply despondent.

"Just look at the economy now," said Wilai, 60, a book shop owner who gave only one name. "I think if politics continue like this, the economy won't be able to move forward."

($1 = 35.06 baht)

Source: Reuters

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Risk Warnings and Disclaimers

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Warren Takunda

Economic

The United States Federal Reserve may not be cutting interest rates to the degree that market participants appear to be anticipating, according to a portfolio manager.

Yet, the broader crypto industry remains hopeful of the looming rate cut in September.

“The market pricing in 100 basis points of cuts by the end of the year is a potential risk, and it is potentially getting ahead of itself, there is nothing to support that thesis,” Caldwell Investment Management portfolio manager Justin Elliot said in an Aug. 14. Bloomberg interview.

Doubt surrounds Fed’s “level of aggression”

Elliot believes that inflation will continue to head in the right direction but warned market participants not to be too confident of the economy continuing to slow down, noting that it is performing “fairly well” and retail sales remain “fairly strong.”

“If you’re of the view that the economy will continue to soften and ease up from here, then we think there is a risk that even the new outlooks might be a little too optimistic and could potentially see some estimate cuts as the year goes on.”

Elliot also opined that there is nothing to support the “level of aggression” expected by the Fed to cut rates, which many Bitcoin investors believe the asset needs to surpass its current all-time high of $73,679.

Interest rates are crucial for Bitcoin because high rates make safe investments like bonds and term deposits more attractive to investors, potentially driving investors away from Bitcoin.

However, lower rates often lead investors to seek out riskier assets like Bitcoin.

Elliot’s comments come after the US Bureau of Labor Statistics (BLS) reported July Consumer Price Index (CPI) data on Aug. 14, showing annualized price increases for consumers of 2.9% — the slowest rate increase since 2021.

Following the announcement, Bitcoin fell by approximately 3%, breaking below the crucial $60,000 level to $58,897, according to CoinMarketCap data. Fed Rate Cuts Are Not a Sure Thing — What Does This Mean for Bitcoin?_1

Fed Rate Cuts Are Not a Sure Thing — What Does This Mean for Bitcoin?_1

Bitcoin is up 6% over the past 30 days. Source: CoinMarketCap

Bitcoin’s decline was likely “due to hopes of a more dovish rate cut,” according to Eliézer Ndinga, head of strategy and business development, digital assets at 21Shares.

Crypto industry remains hopeful

However, the broader crypto industry is still hopeful for a rate cut in September, which has been speculated about for months.

“US inflation will continue to decelerate, further strengthening the case for Fed rate cuts,” ETC Group head of research Andre Dragosch wrote in an X post on Aug. 14.

“CPI data comes out and is positive, slightly lower than expected. The likelihood of a rate cut is approaching for the FED, through which the likelihood of QE & upward price action for Bitcoin has increased,” MN Trading founder Michael van de Poppe added.

Meanwhile, Zach Pandl, Grayscale’s head of research, recently told Cointelegraph that “rate cuts are likely a necessary condition for sustained weakness in the US dollar and fodder for Bitcoin to retest its all-time highs.”

“Fortunately for crypto investors, the incoming data may be a signal for lowering rates sooner rather than later,” Pandl added.

Source: Cointelegraph

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S&P Global Inc.

Data Interpretation

Global economic expansion slows while selling price inflation eases

The global economic expansion slowed further in July, but remained robust by historical standards. This was as price pressures eased, with selling price inflation falling to the joint-lowest since October 2020. Stubborn cost inflation nevertheless remains an area to continue monitoring.

The J.P.Morgan Global PMI Composite Output Index - produced by S&P Global - registered 52.5 in July from 52.9 in June. Despite being the lowest reading in three months, historical comparisons indicate that the PMI is broadly indicative of the global economy growing at an annualized rate of 2.75% in July, which remains robust and is among the strongest indicated over the past year.

Central to the latest deceleration of growth was a slowdown in manufacturing to a state of near stalled production growth. This reflected falling goods new orders, especially among developed economies. Global export orders for goods also declined, down for a second successive month in July, though here we have observed shipping delays playing a part in negatively affecting trade flows. In contrast, services activity expanded at a faster rate in July, spurred by rising inflows of new business.

July's PMI data also offered mixed news on the inflation outlook. Broadly, the PMI selling prices index, which corresponds closely with consumer price inflation trends, eased to the joint-lowest since October 2020 globally to hint at inflation dropping in the coming months. However, the surveys also indicated some upturn in cost growth, which may threaten the outlook for inflation and is therefore an area to continue monitoring. Flash PMI figures for August will be due August 22 for further insights on both growth and prices.

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Devin

Economic

The UK economy grew 0.6 per cent in the second quarter, in only a marginal slowdown from the robust growth of the previous three months, providing some good news for the new Labour government.

The GDP figure from the Office for National Statistics on Thursday compared with 0.7 per cent growth in the first three months of the year and was in line with economists' expectations.

Monthly GDP growth was zero in June following a 0.4 per cent expansion in May, the ONS said. The figure was in line with analysts' expectations.

Hailey Low, economist at the National Institute of Economic and Social Research, said the GDP figures "signal that growth remains on course, building on Q1's strong performance".

But she added: "Persistent challenges such as low productivity growth, strained public finances and inadequate infrastructures have acted as barriers to achieving sustained growth."

Prime Minister Sir Keir Starmer has placed growth at the centre of his economic agenda, promising to "take the brakes off Britain".

Responding to the GDP data, chancellor Rachel Reeves said the government was "under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth".

Reeves argues that unless she can boost Britain's long-term growth rate, the country will be trapped in a "doom loop" of high taxes and poor public services.

But Jeremy Hunt, former Conservative chancellor, said: "Today's figures are yet further proof that Labour have inherited a growing and resilient economy."

"The chancellor's attempt to blame her economic inheritance on her decision to raise taxes — something she had always planned — will not wash with the public," he added.

UK Economy Expands 0.6% In Second Quarter_1

Sterling edged higher following the ONS release. The pound climbed 0.2 per cent against the US dollar to $1.285.

The yield on the interest rate-sensitive two-year gilt rose 0.03 percentage points to 3.58 per cent.

Ashley Webb, economist at consultancy Capital Economics, noted that the 0.6 per cent figure was marginally lower than the 0.7 per cent forecast by the Bank of England.

"At the margin, this may give the bank a bit of reassurance that the recent strength of activity won't prevent further falls in services inflation," he added.

Separate ONS data published on Wednesday showed services inflation, a crucial gauge of domestic price pressures in the eyes of interest rate-setters, fell more than expected to 5.2 per cent in July from 5.7 per cent in June.

The UK economy entered a technical recession at the end of last year after being hit by high inflation and borrowing costs. However, it returned to growth this year, helped by stronger household spending as price pressures and mortgage rates declined.

In August, the BoE upgraded its GDP growth forecast for this year to 1.25 per cent from just 0.5 per cent owing to stronger-than-expected activity in the first half of the year.

It expects quarterly GDP growth to fall back to 0.4 per cent and 0.2 per cent in the third and fourth quarters, respectively.

Suren Thiru, economics director at the ICAEW professional body, said: "This current pace of economic growth is unlikely to be maintained in the second half of the year as weaker wage growth, high interest rates and persistent supply constraints limits output."

Services grew 0.8 per cent in the three months to June, with widespread offsetting falls of 0.1 per cent in the production and construction sectors.

GDP per head, which matters for living standards, posted the second consecutive quarterly expansion, but it remains below the level of the same quarter last year following seven quarters of contraction.

In the second quarter, there were increases in gross capital formation, government consumption and household spending, partially offset by falls in net trade.

In June growth was flat, driven by a fall in services owing to a weak month for health, retailing and wholesaling. The health sector was affected by the junior doctors' strike, while wet weather hit sales.

The UK's GDP quarter-on-quarter figure for the three months to June compares with a 0.3 per cent expansion in the Eurozone and 0.7 per cent growth in the US.

Source: FT

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S&P Global Inc.

Economic

Emerging market conditions fall behind developed market for the first time in over two years

The PMI surveys compiled globally by S&P Global found that output across the emerging markets collectively expanded at the slowest pace since November 2023. The GDP-weighted Emerging Market PMI Output Index fell to 52.4 in July, down from 53.3 in June. This extended the sequence of growth to just over one-and-a-half-years. That said, not only did the pace of expansion moderate, but the pace of growth for emerging markets was slower compared to the 52.7 print for developed markets, the former recording a comparatively lower reading for the first time since May 2022.

Emerging markets nevertheless saw a more broad-based expansion than the developed world in July: as output rose in the emerging markets across both the manufacturing and service sectors while developed markets growth was wholly supported by an improvement in the service sector.

Divergence in manufacturing and service conditions

Central to the latest slowdown in emerging market growth was a slower rate of improvement in the goods producing sector. The pace at which manufacturing output expanded among emerging markets eased markedly in July, down to the slowest since October 2023. In contrast, services firms across emerging markets saw activity increase at a rate that was solid and faster compared with June.

The slowdown in emerging market manufacturing performance was part of a wider deterioration in global manufacturing performance in July, with instances of shipping delays playing a part to dampen export demand.

Focusing on forward-looking indicators, the PMI surveys' new orders data showed likelihood of this divergence sustaining into August, with manufacturing new orders near-stalling among emerging market firms while services new business rose at a faster pace in July.

Overall sentiment in the emerging markets also remained subdued, with optimism levels having improved from June but remained the second lowest in 28 months. Anecdotal evidence suggests that concerns from panellists ranged the outlook for growth and also elevated price pressures on sales.

Cost pressures rise for services firms but ease for goods producers

A divergence in sector trends were also apparent in the PMI price gauges. Input cost inflation rose to a near one-year high in the service sector but eased for goods producers. Both the rates of inflation were nevertheless above their respective 12-month rolling averages to indicate that cost inflation remained elevated going into the second half of 2024.

Compared to developed markets, however, cost pressures in emerging markets were relatively lower, with developed market input cost inflation having climbed to the highest level in ten months.

The relatively subdued level of optimism among emerging market firms meant that firms were keen to keep output (selling) price increases contained, despite the highest costs experienced during July. The overall emerging market Output Price Index declined to a three-month low with slower increases in both the manufacturing and service sectors.

India continues to lead growth among major emerging market economies

Looking at the four major emerging market economies, India retained the top spot in terms of economic growth for the twenty-fifth month in a row in July. Furthermore, the rate of output expansion in India remained well above the series average to indicate that the sharp expansion in activity sustained into the start of the second half of the year. India has also notably seen manufacturing output rise at a faster pace than services activity, running against the global trend.

Following India was Brazil, where the rate of growth rose for a second successive month to the fastest in just over two years. Mainland China and Russia meanwhile saw more modest rates of expansion, the latter returning to modest growth after declining in June.

Price-wise, all four major emerging market economies except mainland China saw average selling prices rise at a faster pace in July. A marginal decline in prices was meanwhile observed for mainland China for the first time since March, brought about by falling manufacturing selling prices as producers opted to reduce selling prices to support sales.

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