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GDP flatlined at the end of 2019

Written by: Paloma Kubiak
UK Gross Domestic Product (GDP) stalled in the final three months of 2019 as Brexit and the general election hung over the economy.

While growth of 0.1% and 0.5% was reported in the services and construction sectors respectively, the positive figure was offset by a 0.8% fall in the production sector in the three months to December.

The Office for National Statistics (ONS) said the 0% growth followed a period of volatility throughout last year, in part linked to changes in the timing of the UK’s exit from the EU from March to October.

The general election in December was also a factor in the stagnant GDP figure which saw growth of 0.5% in the previous quarter.

However, taking the month of December alone, GDP grew 0.3%, up from a 0.3% fall in November.

Headline GDP grew by 1.4% in 2019, compared with 1.3% in 2018. Breaking this down by sector, services grew by 1.8%,  construction grew by 2.5% and production fell by 1.3%.

‘Early shoots of a bounce are starting to appear’

Chris Towner, director at Chatham Financial, a risk management firm, said: “The UK saw no growth in the final quarter of last year as the first December general election in generations repressed household spending and business investment.

“Household spending, normally the reliable driver to growth in the UK, slumped to a 4-year low. The question now for the first quarter of 2020 is whether we are going to witness a bounce in activity as a reaction to the healthy majority for the more business-friendly Conservative Party. Early shoots of a bounce are starting to appear.”

Ayush Ansal, chief investment officer at hedge fund Crimson Black Capital, said the December uptick may be seen by some as the first sign of the ‘Boris bounce’, which could set the tone for 2020 as a whole.

“There’s a growing sense that 2019 should be bracketed off as a political and economic anomaly rather than seen as a sign of things to come,” he said.

“With Brexit uncertainty reaching fever pitch, the political goal posts were changing by the day throughout 2019 and to read too much into output during the year could be erroneous.

“Markets will be far more focused on how the economy performs in the first quarter of this year than the fourth quarter of 2019.”

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