UK growth downgrade highlights households’ challenge
The Office for National Statistics downwardly revised first quarter GDP growth in the UK amid figures that show pay growth lagging inflation.
A second official UK GDP print downgraded growth from 0.3% to 0.2% for the first quarter. This indicates that the slowdown at the start of the year was more pronounced than first thought.
Breakdown highlights ongoing pressure on households
Household consumption was one of the main contributing factors, with growth slowing from 0.7% to 0.3%. However, net trade was also a disappointment, with the balance reducing GDP by 1.4 percentage points. The volume of exports fell 1.6% from a very strong 4.6% in the previous quarter. Meanwhile, imports jumped by 2.7%, compared to a 1% fall previously.
There was some good news in the figures. Business investment was higher than expected, while government spending also picked up by more than expected. However, it is worth mentioning that had inventories not picked up through the quarter, the economy would have stalled.
Inflation continues to outpace wage growth
Overall, a weak set of figures, highlighting the challenge that households are facing: weak pay growth that is not keeping up with inflation. What makes matters worse is that inflation is still rising, and this period of weakness could persist for some time.