In the National Accounts published just before the Christmas break, the ONS revised down its estimate for GDP to show no change compared to the previous quarter (the first estimate had shown growth of +0.1%). The annualized growth rate was also reduced from +1.0% in the original release to +0.9% in the National Accounts.
While these revisions are only marginal, they serve to emphasize the point that following a strong start to 2024, the UK economy weakened significantly in the 2nd half of the year. Indeed, the Office for National Statistics (ONS) also reduced its estimate of growth for the 2nd quarter by 0.1 points to +0.4% quarter-on-quarter, although this was largely because of an upward revision to the size of the economy in the 1st quarter (and Q4-23).
While there were minor downward revisions to the output estimates for the services (no change from +0.1%) and construction (+0.7% from +0.8%) sectors, there was a more significant reduction for the manufacturing sector where output is now estimated to have fallen by -0.1% compared to the second quarter – the initial estimate was growth of +0.2%. We will need to wait for the detailed industry figures which are published next week to see if this is a widespread effect or if it is concentrated in certain industries.
However, for us, the most important element of the National Accounts is the industry breakdown of the investment figures. At the headline level, there is mixed news as while total business investment growth has been upgraded to +1.9% (from +1.2% in the initial estimate), spending on “ICT & Other Machinery” has been revised down to a fall of -1.3% having been +0.6% when the first release was published.
The new data shows that total manufacturing investment was -1.1% lower than in the 2nd quarter of the year and -2.5% down on Q3-2023; the 4-quarter moving average, effectively an annualized rate, fell by -0.4% in the period to the 3rd quarter of 2024. The manufacturing sector accounted for 15.6% of total business investment in the 3rd quarter of 2024 – this is the lowest ratio since the same figure was recorded in Q4-2020.
Within manufacturing, spending by the engineering & vehicles industries was -0.9% lower than in the previous quarter but +0.5% higher than a year earlier, with the annualized rate showing an increase of +1.6%. As a result, this group of industries accounted for 44.7% of total manufacturing investment in the latest period.
You can download the ONS Statistical Bulletin for the National Accounts from their website at https://www.ons.gov.uk/releasecalendar (23 December) or request it from MTA.