Magnitude of slowdown in UK more amplified than anticipated

The services component of the December 2015 Turnover and Orders in Production and Services Industries (TOPSI) release printed 1.5% m/m, resulting in a 1.9% q/q decline for Q4 15 (in non-seasonally adjusted nominal terms) after 2.8% q/q growth in Q3 15.

The preliminary estimate of Q4 15 GDP growth printed at 0.48% q/q, driven primarily by Services (+0.52pp contrib., 0.66% q/q), with Industrial Production and Construction detracting (-0.03pp contrib., -0.24% q/q and -0.01pp, -0.13% q/q respectively).

It is to be noted that the Dec prints for industrial production and construction output were not readily available at the preliminary GDP estimate's release. Both sectors combined make up 20% of the UK economy and it transpires that the Q4 growth for industrial production and construction output printed weaker-than-expected; resulting in a 0.06pp downside risk to the preliminary headline GDP growth estimate.

"We revise down our Q4 15 GDP forecast 0.1pp to 0.4% q/q in light of this weak print, as well weakness in industrial production and construction output (released 10 February and 12 February, respectively). We therefore expect the ONS to revise down its estimate of Q4 15 GDP growth by 0.1pp on the second release (25 February 2016) from a print of 0.5% q/q in the preliminary release." said Barclays in a report.