We are in the part of the month when we get a sequence of UK economic figures and this morning it was the economic  output series. So we can start with better news on the Gross Domestic Product front.

Monthly real gross domestic product (GDP) is estimated to have grown by 0.2% in January 2024, following a fall of 0.1% in December 2023.

So we can start 2024 with the hope that it will be a better year for the economy than 2023 was as 0.2% GDP growth each month would produce something around 2.5% for the year, which for these times is good. Although care is always needed with the erratic nature of the monthly numbers as last January we started the year with 0.5% GDP growth and look where we ended up ( recession).

However there are other reasons to have some optimism as we look forwards to 2024. For example there will be a cut in domestic energy prices next month. Plus the Purchasing Managers Survey has been optimistic.

“Another solid expansion of business activity across the
service sector in February adds to signs that the UK economy has turned a corner after entering a technical recession during the second half of 2023.
“New business intakes were a particularly bright spot as
service providers reported the fastest order book growth
since May 2023. Survey respondents cited rising business and consumer spending, linked to improved optimism towards the broader economic outlook”

The PMI is not a perfect guide as the 0.1% fall in December showed but we seem to have started this year with some momentum which it feels continued into February.

Breaking it Down

Services

We have what for the UK is normal service as much of this is simply the services sector.

On the month, services output is estimated to have grown by 0.2% in January 2024, following a fall of 0.1% in December 2023, with 9 of the 14 subsectors experiencing growth in January 2024.

As you can see it both drove and matched the GDP moves in this instance. Going further I often find myself pointing out that consumption is much more than retail sales but it was a player this time around.

The largest contribution to the 0.2% growth in services in January 2024 was wholesale and retail trade; repair of motor vehicles and motorcycles, which saw a 1.9% growth on the month, following a 1.9% fall in December 2023. The largest contribution came from retail trade, except of motor vehicles and motorcycles, which grew by 3.4%.

Next up are developments that make me mull again the decision to measure GDP for these sectors via output. Because whilst in theory that is correct in practice it is much harder as we found out during the Covid pandemic.

Human health and social work activities grew by 0.6% in January 2024 following a 0.9% fall in December 2023. Human health activities grew by 0.9%, mainly caused by growth in the market sector, and was the largest contributor to this growth in January 2024. Education also saw growth on the month, up by 0.7%, following three consecutive monthly declines.

The decliners were led by this.

These growths were partially offset by a monthly fall of 0.9% in professional, scientific and technical activities, where five of the eight industries saw falls on the month

However I can offer a little hope for the next sector as there was a fair but of filming in Battersea Park in February.

Information and communication fell by 0.7% in January 2024, mainly attributed to a 9.5% fall in motion picture, video and TV programme production, sound recording and music publishing activities.

Production

Here there was a different picture.

On the month, production output is estimated to have fallen by 0.2% in January 2024, driven by a fall of 2.2% in water supply; sewerage, waste management and remediation activities.

Those outside the UK may be unaware that the water and sewerage sector has been rather a shambles with sewage leaks and proposed price rises. Sadly the regulator Ofwat has been asleep at the wheel as the companies concerned have been allowed to benefit their owners rather than provide a decent service. But that in some ways is minor compared to the next bit as we recall we are in the middle of an energy crisis.

Mining and quarrying output fell by 1.3% in January 2024, after a fall of 1.8% in December 2023. The January 2024 fall was driven by a 11.4% decline in other mining and quarrying.

That looks neutral but the UK does have oil and gas reserves in the North Sea. Look what we have down about this at a time of national priority.

Mining and quarrying output is estimated to be 19.3% below its level in January 2022. The decline since January 2022 can be mainly attributed to the extraction of crude petroleum and natural gas. The Department for Energy Security and Net Zero (DESNZ) energy trends publication reports reduced investment in the mature North Sea basin as a reason for the recent downward trend in this industry.

This is an important point and shows how incompetent both this government and our political class ( as there has been consensus on “Green” energy policies) have been in this area. The chart below shows this and I do not mean the overall decline as there was always going to be a decline. I mean the last bit when the present government was stopping new drilling and actively discouraging new investment. We could have maintained output if we had tried.

The position is highlighted by the announcement yesterday that we will need new gas fired plants to maintain our electricity supply. Surely it would be sensible to use as much of our domestically produced gas as possible.

Manufacturing  flat-lined bur there was a little hope.

Manufacturing showed no growth in January 2024, with growth in 7 of the 13 subsectors offset by falls in the other 6 subsectors, after growth of 0.8% in December 2023.

What I mean by that is we saw one of those months when pharmaceuticals swing lower so when it swings higher in its usual pattern we should see some growth.

The largest negative contributor came from manufacture of basic pharmaceutical products and pharmaceutical preparations (down 5.1%).

Construction

This had the strongest monthly growth of the main sectors.

In January 2024, monthly construction output is estimated to have increased 1.1% in volume terms……The increase in monthly output in January 2024 came from increases in both new work (1.1%) and repair and maintenance (1.2%).

Perhaps the weather was at play here as whilst we have had plenty of rain it has overall been a mild winter.

Comment

The return to economic growth is welcome especially as there were brakes on the numbers.I have already mentioned the disastrous energy policy the UK has followed and there was also this.

Like recent months, industrial action was again cited as a reason this month, which may have negatively impacted output. In January 2024, there were six days of industrial action by junior doctors and hospital dental trainees after three days of industrial action took place in December 2023.

Actually even international strikes.

while the industrial action had ceased, the Screen Actors Guild strikes in America were cited as a factor which may have reduced film and TV production this month.

Plus there was this.

Comments provided to the MBS for January 2024 suggested some industries saw supply chains impacted by disruption in the Red Sea.

If we look back we see that a quarterly number would still show a recession.

Real gross domestic product (GDP) is estimated to have fallen by 0.1% in the three months to January 2024, compared with the three months to October 2023.

Plus the burst of growth in January last year leaves us with this.

GDP is estimated to have fallen by 0.3% in January 2024 compared with the same month last year and, looking over the longer term, GDP is estimated to have fallen by 0.2% in the three months to January 2024 compared with the three months to January 2023.

Oh and take care if you watched BBC Breakfast TV as the business present Ben seemed unaware that 0.2% monthly growth if repeated would be pretty strong growth as opposed to his “slowly and slightly”.