UK economic growth unrevised at 0.1% in Q1 2023

BRITAIN’S economy grew 0.1 per cent in the first quarter of this year, unrevised from an initial estimate published last month, figures from the Office for National Statistics (ONS) showed on Friday (Jun 30).

However, the ONS said Britain’s GDP in the first quarter of this year was 0.5 per cent smaller than it was before in the final quarter of 2019, before the Covid-19 pandemic. This was also in line with a previous estimate.

“The final Q1 2023 GDP data confirms that the economy steered clear of a recession at the start of 2023. But with around 60 per cent of the drag from higher interest rates yet to be felt, we still think the economy will tip into one in the second half of this year,” said Ashley Webb, UK economist at consultancy Capital Economics.

Britain’s economic recovery since the Covid-19 pandemic has been much slower than almost every other big advanced economy. Germany has struggled too, and its economy in the first quarter was 0.5 per cent smaller than before the pandemic.

British households have been under pressure from a surge in inflation, which hit a 41-year high last year after Russia’s invasion of Ukraine sent natural gas prices soaring.

Friday’s figures showed that households’ real disposable income was 0.8 per cent smaller than the previous quarter, reflecting higher costs for electricity, gas and food.

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There were also signs that people were saving less in response to the increased cost of living, as the savings ratio fell to 8.7 per cent in the first quarter from 9.4 per cent in the quarter before, its lowest level since the second quarter of 2022 though well above its pre-pandemic average.

Britain’s current account deficit totalled £10.8 billion (S$18.5 billion) in the first quarter, above economists’ forecast of £8.5 billion in a Reuters poll and equivalent to 1.7 per cent of GDP. Stripping out volatile trade in precious metals, the ONS’ preferred measure, the underlying current account deficit narrowed to 2.6 per cent of GDP from 3.3 per cent of GDP in the final quarter of 2022.