Standing at 1,5%, the GDP growth that the UK posted on the 2nd quarter of 2013 was remarkable (inserting irony here is optional). What’s more it was the 4th highest in the EU27 and by far the highest among its high income members.
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| source: Eurostat |
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| source: Eurostat |
But which were the catalysts driving it? In the
next chart, as I sometimes do, I’ve plotted GDP components’ year over year changes
in 2005 constant prices so that we can get a sense of each one’s contribution
in overall growth.
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| source: Eurostat, own calculations |
Household final consumption along with Gen.
Government final consumption, Exports and Imports contributed so the growth figure
was reached. A few points stand out in my humble opinion.
First, gross capital formation has not made a
positive contribution since 2012Q1.
Second, household consumption is one of the
bigger growth drivers for the post five quarters. That would surely be positive
in an international environment where households cannot find their footing (to
put it mildly) were it not for one fact.
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| source: Eurostat |
For Q42012 and Q12013 the gross household saving
rate has been falling pretty fast compared to what it was a year ago. This
means that part of the growth in household final consumption is driven by that
fact.
Third, the past two quarters imports declined
and at the same time household final consumption grew. This could mean that
either additional spending was directed at non-tradable goods and services or
that some degree of imports substitution took place.
To wrap this up, higher UK growth is
underpinned up to a point by the fall in household saving rate. What is even more troubling is the absence of fixed investment. It would be
positive if resumed export growth observed in Q2 continued in the coming quarters and I
would be very interested to see if we will see more of the weird couple
(falling imports and rising household final consumption).
