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National accounts revised upwards, pointing to a stronger Q1 2024
UK economic growth in the first quarter of 2024 was slightly stronger than initial estimates, revised upwards from 0.6% to 0.7%, according to the Office for National Statistics.
First-quarter national accounts showed the increase was fueled by consumer spending and net trade, although slightly offset by weaker business investment and public consumption. Real household income continued to grow, but a higher savings ratio suggests that consumers remain cautious.
With consumer confidence rising, sustained gains in real incomes are expected to drive stronger spending, which could lead to a decent consumer-led recovery.
Peter Arnoldchief economist at EY UK, said: “The income breakdown indicated that the 0.4% increase in consumer spending in the first quarter was supported by continued strong growth in household real disposable income, which rose by 0.7% for the second consecutive quarter. This meant the household savings ratio rose to 11.1% in the first quarter, up from an already high 10.2% in the fourth quarter of 2023.
“Looking ahead, EY ITEM Club expects GDP to grow at a decent pace in Q2. The composite Purchasing Managers’ Index (PMI) averaged the same in Q2 as in Q1. However, the earlier-than-usual Easter appeared to boost consumer activity in March at the expense of April, while the healthcare strike in June is likely to hurt output this month. Therefore, EY ITEM Club believes that quarter-on-quarter GDP growth is likely to be somewhat softer than the strong increase in Q1.”
“Going forward, the EY ITEM Club expects low inflation and persistently strong wage growth to mean that real household incomes will continue to grow strongly. Provided that rising consumer confidence results in households gradually moving away from the cautious sentiment exhibited over the past year, the EY ITEM Club believes there is a prospect of a decent consumer-led recovery.”