Was 1st Quarter growth in the UK understated? Bank of England predicts steady growth in business investment

Some have made much of the slowing in UK growth to 0.2% in the first quarter of 2017. It picked up a bit thereafter.

In the Bank of England’s Inflation Report for August we find the following interesting quote:
Quarter 1 growth “slowed sharply to 0.2%. The GDP backcast, which takes into account the revision properties of the official data and information surveys, suggests that growth in Quarter 1 was higher, at 0.4%”.

The Inflation Report also reveals a worse balance of payments position in the first quarter than the Bank expected, with more imports than in their forecast. This meant international trade subtracted 0.4% from our GDP, given the continued high level of imports. This puts a different slant on the picture from the loss of confidence myths.

Contrary to some comments on the current position, the Bank was relatively positive on business investment, though would like it to rise faster. They said ” Business investment is estimated to have risen by 0.6% in Quarter One…. Investment is projected to continue to grow at a steady pace in the near term”.

The UK economy could clearly benefit from more investment in capacity, both to replace imports and to meet export demand. The rising profitability of business in general and the availability of low cost credit should encourage more such investment.


  1. Lifelogic
    August 8, 2017

    “The rising profitability of business in general and the availability of low cost credit should encourage more such investment”, well maybe.

    Unfortunately, expensive greencrap energy and the over tax, over borrow, over regulate and endless waste agenda of May and Hammond rather discourages it. The prospect of them being replaced by Corbyn and a UK version of Venezuella does not help either.

    Oh for someone sensible in charge of the Conservatives. Perhaps even a Conservative for a change rather than another wet, remainer, socialist. We have had more than enough of them. Indeed we have really had nothing but them in my lifetime.

    1. Anonymous
      August 8, 2017

      The debt enslaved and impoverished youth is a Labour invention. So why are we surprised the country is turning Labour ?

      It does not serve Labour well to have a happy an content people. They need problems to solve and where there aren’t any they have to make them.

      Labour think tank meeting 21 years ago “We’re not needed anymore. I know. Let’s import the third world !”

  2. Duncan
    August 8, 2017

    I care not one jot for the ramblings of Carney and the cronies he oversees. The EU referendum revealed this once revered British institution for what it now is, a highly political animal. Its reputation impaired, its independence impinged and its musings compromised and generally dismissed.

    Of course this bank like other central banks have an influential role to play in the functioning of a modern economy but the material prosperity we enjoy today in the UK is thanks not too this hive of ‘civil servants’ but to the myriad of profitable businesses that provide the goods and services we all take so readily for granted

    As to the forecasts spewed out by Carney and his pro-EU lackeys, they may as well not bother for no one believes them anymore

    1. Lifelogic
      August 8, 2017

      Exactly as you say:-

      The material prosperity we enjoy today in the UK is thanks not too this hive of ‘civil servants’ but to the myriad of profitable businesses that provide the goods and services.

      They do all this despite all the bonker obstacles, regulations and taxes that are put it their way by halfwitted governments. They survive because they provide what the customer wants and is willing to pay for.

      Rather unlike governments, which just taxes, under threat of imprisonment and then largely wastes what they have perloined.

    2. Timaction
      August 8, 2017

      Right on the money. After his antics in the build up to the referendum, his lowering interest rates/printing money to try and justify his project fear to reduce the value of the pound. His credibility is shot. Ask Jacob Rees Mogg.

  3. Mark B
    August 8, 2017

    Good morning.

    I have read elsewhere that material price increases, due in part to QE and the fall in the pound, are now creeping into the economy. One area is that of energy and we have witnessed higher than normal price increases here too.

    As consumer demand is both blunted by higher prices and lower wages there will, inevitably, be some slowing down of the economy from the mad levels of previous years. For an economy such as ours, which is built on consumerism, this could have a cascading effect, and not just here in the UK.

    Things are defiantly slowing down and I think this probably a good thing. There has been too much heat in the UK economy and the likes of Germany have been the main beneficiaries along with all those East European migrants who, it seems, are beginning to either go home or elsewhere – they have made their money.

    Out of the EU we, hopefully, will be able to source more of our food and others goods on the World Market and achieve better prices. This intern may make the EU, and Germany in particular, more determined to trade terms post BREXIT.

    But things are defiantly cooling and sooner we accept it the better.

    1. Anonymous
      August 8, 2017

      “For an economy such as ours, which is built on consumerism…”

      Actually it’s built on overcrowding. The added ‘wealth’ it gives to homeowners and their ability to borrow more against their inflated house prices.

      Since, the lenders have turned their inventiveness to people who cannot afford houses and who need to boost their self esteem somehow… an shiny new car !

      This is the economic reason for mass immigration – not cheap labour, not the ageing population crisis but to keep feeding the credit monster.

  4. James Winfield
    August 8, 2017

    Unlikely. It was reduced from 0.3% to 0.2% at a previous review.

    Try and replicate Donald Trump all you like, but we are not that dumb.

  5. Alan Jutson
    August 8, 2017

    Rather surprised the Growth has lasted so long when tax rises have been so many and plentiful.

    Shame the roof has not been fixed during the last 10 years, as it would have given the Government more opportunities and flexibility to act.

    Lets hope it is just a temporary slow down, because if its not then we will have more people here doing less, which may well mean more people claiming a whole range of benefits which the taxpayer (Government) will need to fund in some way.

    Question is will immigration slow, or be allowed to carry on as it has in past years.

  6. Denis Cooper
    August 8, 2017

    An initial estimate of Q1 GDP growth of 0.2% and a corrected estimate of Q1 GDP growth of 0.4% are both within the normal kind of range over the longer term.

    The chart of quarterly growth rates given here:


    can be set to run back to 1956, since when it’s been all over the place for many different reasons at different times but averaged 0.61 percent.

    And one really would need the eye of europhile faith to be able to detect any effect of the UK joining the EEC or Common Market in 1973, or of the later creation of the EU Single Market, and that is one reason why I am not expecting the long term economic effects of Brexit to be tremendous one way or the other. On balance I expect we will be a little better off, but either way it will not be as huge as some on either side like to claim.

  7. Epikouros
    August 8, 2017

    The growth of imports can be attributed to export companies adding raw and basic goods for converting into goods to resell back abroad. It could be something else entirely. Every indicator can have very many reasons for what it tells us but of course there are those who will cherry pick one(s) that supports their cause or denigrates the cause of those they oppose. Impartial comment will be hard to identify but potential biased will not be as all that has to be identified is who is making the comment. For instance if it is the Guardian or the BBC it will be to champion the causes of the left and anti-Brexiteers. Apart from which one bad indicator alone tells us only to be on our guard and a repeat or worse should make us alarmed and so act swiftly. It is further complicated if other indicators are telling us something different. So we should not be quick to judge and act and wait till the picture is clear enough to be able to formulate the correct response. Too often we knee jerk react only to find we have made the situation worse and/or created new problems.

  8. Terry
    August 8, 2017

    I don’t know about anyone else but I am sick to the back teeth of various “Officials” regularly putting this country down instead of talking it up.
    Those that cannot now support the democratic decision of the British people should do the honourable thing and resign to mark their protest.

    The fight is over and Leave won, so all efforts from ALL of the relevant officials should be focused on putting this country forward and not perpetually pressing for a change to the Referendum result. To me such abominable actions reek of treachery and betrayal of our Nation.
    If such persons cannot accept our democracy they would be better off living in Brussels.

  9. Caterpillar
    August 9, 2017

    The BoE aims to maintain plausible deniability.

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