A Slight Rebound In GDP

Output rose by 0.3% q/q in Q1 2013 after falling by 0.3% the previous quarter. On year-on-year basis, GDP increased by 0.6%. The main contributor to the increase was the service sector (+0.6% q/q). The weakness of world demand remains a drug, but GDP, up by 0.3% in 2012, may grow faster this year.

The United Kingdom escaped from a triple-dip recession. According to the ONS preliminary estimate, output rose by 0.3% q/q in Q1 2013 after falling by 0.3% the previous quarter. On year-on-year basis, GDP increased by 0.6%. The components of demand will not be available until the end of next month, when GDP second estimate is published. We can, however, assume that the weakness of global demand once more weighed on the British economy, which is thus likely to have been supported by domestic demand.

The main contributor to the increase was the service sector (+0.6% q/q), which contributed 0.5 pp. In particular, distribution, hotels & restaurants activities and transport storage & communication underpinned activity. There was also a slight positive contribution from industrial production to growth (0.03pp). Manufacturing production declined by 0.3% q/q, but industrial production (+0.2% q/q in Q1 2013, after -2.1% q/q) benefited from a rebound in mining and quarrying (+3.2% q/q, after -10.7% q/q in Q4 2012), which had suffered from maintenance shutdowns at the end of last year. It was also underpinned by electricity production in line with cold weather. However, activity in construction, which recorded in Q4 2012 its first increase since Q2 2011, was down by 2.5% q/q, reducing GDP by 0.17pp.

The euro zone crisis and the global economic conditions still weigh on the economy. GDP thus remains 2.6% below the peak in Q1 2008. But GDP, up by 0.3% in 2012, may record a larger increase this year in line with an improvement in world demand.

BY Catherine STEPHAN

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