Good News – GDP has grown by 1.9% in 2013

by Neil Patterson

11:36 AM, 28th January 2014
About 5 years ago

Good News – GDP has grown by 1.9% in 2013

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Good News – GDP has grown by 1.9% in 2013

The Office for National Statistics (ONS) has this morning reported the UK economy has grown by 0.7% in the fourth quarter of 2013 with total GDP for the year growing by 1.9%.

These are the best annual growth figures since 2007 (recorded at 3.4%) although we are still 1.3% behind the peak GDP figure in Q1 2008. We are therefore still recovering from the deepest recession in history in which GDP decreased by 7.2%.

GDP graph

 

The contribution an industry sector makes to GDP quarterly growth is dependent on its weighting to the economy with services contributing 77.8%, production 15.2%, construction 6.3% and agriculture
0.7%.

Construction output decreased by 0.3% in Q4 2013, following an increase of 2.6% in the previous quarter. Between Q4 2012 and Q4 2013, construction output increased by 4.5%. Growth figures in the construction industry although not greatly affecting the overall economy are a positive signal considering it is the lack of housing supply that is driving the price boom in London and parts of the South East.

The Office for Budget Responsibility recently revised its 2013 UK growth forecast from 0.6% to 1.4% and is currently forecasting growth of 2.4% for 2014, but if the economy continues recovering at its current pace this may yet have to be revised again.

The International Monetary Fund has also increased its growth forecast for the UK economy from 1.9% to 2.4% making us the fastest growing economy in Europe.

With GDP now nearly hitting the Bank of England target of 2% growth and inflation matching its target of 2% the recovery is within forecast plans, but still fragile due to foreign economic uncertainty. Mark Carney The Governor of the BofE has confirmed there is no pressure to increase interest rates above their current level.

I deliberately used the title Good News as I have already seen headlines by the press scaremongering without evidence over interest rates.



Comments

Some One

12:00 PM, 28th January 2014
About 5 years ago

There's something wrong with that graph - it suggests total GDP is less than £400 milliard, which equates to about £6,000 per head, which clearly isn't right.

Is the right hand scale just a single sector or somesuch?

Neil Patterson

12:20 PM, 28th January 2014
About 5 years ago

Reply to the comment left by "Some One" at "28/01/2014 - 12:00":

Hi Some One,

That is 400,000 millions = 400 Billion

Some One

12:29 PM, 28th January 2014
About 5 years ago

Yes, 400,000 million is wrong for total GDP, should be about 1,460 milliard, or 1.46 billion[1]

400 x 10^9 equates to about £6,000 per head which is somewhere round about Mexico's level, so is it a sectoral graph?

[1]I'm being slightly contrarian here, as I'm trying to hold out against an oncoming deluge of billion = 10^9 rather than it's true British value of 10^12, but such is the way of inflation that a billion isn't what it used to be.

Some One

12:39 PM, 28th January 2014
About 5 years ago

OK, looks like it's GDP per quarter on the right hand scale, I was expecting it to be a moving average 12 month figure.

Neil Patterson

12:52 PM, 28th January 2014
About 5 years ago

Ok just caught up with you. Very sorry yes 400 billion per quarter I thought you meant £400 million which would be low.

But yes we will stray into UK or US Billion debate. I think we use The US Billion as a standard because our Billion is to big a number to deal with.

Neil Patterson

12:53 PM, 28th January 2014
About 5 years ago

Reply to the comment left by "Neil Patterson" at "28/01/2014 - 12:52":

Let's not get started on Trillions lol 🙂

Mandy Thomson

14:42 PM, 28th January 2014
About 5 years ago

On the whole, it is good news, however, I do think we still need to be wary of consumers spending on credit - the Telegraph reported borrowing up last September http://www.telegraph.co.uk/finance/personalfinance/borrowing/loans/10417604/Fears-of-debt-fuelled-recovery-as-credit-card-spending-jumps-revised-BoE-data-show.html possibly driven by uncertainty, instability and low wages within the job market. As some economists are suggesting, if interest rates go up, those with a high level of personal debt will suffer, with an obvious negative impact on the economy.

Neil Patterson

15:12 PM, 28th January 2014
About 5 years ago

Reply to the comment left by "Mandy Thomson" at "28/01/2014 - 14:42":

I agree with you Mandy and the BofE are aware of the repercussions of an increase in interest rate and how fragile recovery is.

We could equally see growth slow as pick up pace this year in my opinion.

The economy is dependent on many many factors and I just wanted to remind people that this one factor is actually good news 🙂

Some One

16:55 PM, 28th January 2014
About 5 years ago

The other thing interesting to note is that the growth has allowed the debt:gdp ratio to fall marginally.

Neil Patterson

17:00 PM, 28th January 2014
About 5 years ago

That is very much what government is banking on in the future to balance our books as cutting costs only has a small effect where as growing out of a deficit is far more effective.


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