UK GDP report to show if economy grew in Q1 2023 and in March

Introduction: UK GDP report coming up…..

Good morning. We’re about to learn how the UK economy performed in the first quarter of this year.

The first estimate of UK GDP in March, and for Q1 2023, is due at 7am BST, and will show if the country achieved economic growth in the face of the cost of living crisis, rising interest rates and strikes.

Economists are hoping we will see modest, positive growth in the first quarter of the year, with GDP forecast to have risen by 0.1% in the January-March period.

GDP in March itself could be flat, though.

That would follow a strong January, when the economy grew by 0.4%, and a weak February when there was no growth at all [tho this data could be revised at 7am too].

A few months ago, economists had feared the UK could be in recession by now. But the fall in energy prices has helped the economy to outperform those gloomy expectations.

Yesterday, the Bank of England admitted that economic activity has been less weak than it expected in February. It now forecasts that UK GDP will be flat over the first half of this year, although underlying output (excluding the estimated impact of strikes and an extra bank holiday) could rise by around 0.2% in both Q1 and Q2.

On its upward growth revision, BoE governor Andrew Bailey said:

“It’s a very big upward revision, but the level of growth is still very, it’s still weak, let’s be honest.”

February’s growth was held back by civil service and teachers’ strikes, which hit the services sector.

And industrial action is continuing today, with members of the drivers’ union Aslef striking for 24 hours across virtually all the big passenger operators in England.

Further strikes will be held on May 31 and June 3 – the day of the FA Cup final at Wembley.

Members of the Rail, Maritime and Transport union (RMT) will strike on Saturday – the day of the Eurovision Song Contest final in Liverpool.

The agenda

7am BST: UK GDP report for March and Q1 2023
7am BST: UK trade report for March
9.30am BST: Hong Kong GDP report
3pm BST: University of Michigan index of US consumer sentiment

Key events

The UK economy is expected to “grow modestly in Q1”, predicts Michael Hewson of CMC Markets.

That would follow a “surprise upgrade” to growth data for Q4 2022 which showed the UK economy eke out growth of 0.1%, and “confounding the expectation of a technical recession”, he adds:

The first 3 months of this year have seen the economy perform much better than even the most optimistic of forecasts, leaving lots of egg on the faces of those who were predicting all manner of disasters during the twilight weeks of last year.

The OBR, IMF, OECD, and Bank of England have all been proved to be unduly pessimistic in their assessments of the UK economy in recent months, particularly when it comes to growth.

The unexpected weakness in commodity prices, namely oil and gas, as well as the milder weather has certainly helped, while consumer spending has proven to be much more resilient.

Analysts at RBC Capital Markets predict the UK economy managed to grow, just, in the first quarter of this year.

They told clients this morning:

Strikes and industrial action have weighed on Q1 GDP, particularly in February and March.

Nonetheless, Q1 GDP growth is likely to be positive overall. Indicators of private sector activity and sentiment continue to improve, and while we expect the loss of output from the public sector to weigh on activity overall, we still expect positive March GDP growth of 0.1% m/m, which would leave quarterly GDP growth at 0.1% q/q.