We envisaged a clearer rise in January GDP, but the flat m/m reading failed to build on the better-than-expected 0.3% outcome from the previous month. This means that the UK has not had a consecutive rise in GDP since July. Moreover, due to Brexit-related base effects, the y/y rate halved to 0.6%, the weakest outcome since mid-2012.
This data result adds to the picture of slower underlying momentum in recent months, even before COVID-19 started having an impact. That said, some of the weakness in utilities and construction may have been due to warm and wet weather. If so, this may manifest itself more in February's GDP numbers. Regardless, the weaker GDP profile does not chime with the better business survey backdrop at the turn of the year, which was possibly an added factor in persuading the Bank of England (BoE) to implement its easing package on March 11. The signs of weakness in non-retailing services output are notable, as this development has been evident in recent months on the spending side of the economy.
Regardless, the January print brings the GDP level on the month to just 0.1 ppt above the Q4 reading. This makes it likely that, even if there is some correction to February's and March's numbers, the Q1 GDP reading will undershoot the BoE's 0.2% q/q estimate. A negative print is now much more likely.
