Quotes from UniCredit Research:
- UK GDP growth in Q4 14 was unrevised at 0.5% qoq in the ONS' second estimate. That was in line with expectations but the expenditure breakdown was anything but. Indeed, the fourth quarter saw a shift in the drivers of growth away from domestic demand and towards exports.
- The expenditure breakdown of GDP revealed that growth was entirely externally driven in 4Q14. The fall in investment (-0.5% qoq) in 4Q14 was largely due to a 1.4% qoq fall in business investment - the second consecutive quarter of decline following a 1.2% fall in 3Q14. At face value this would be a concern. However, the ONS said that a large part of the fall in business investment came from a fall in oil and gas extraction investment.
- This is not surprising given the sharp fall in oil prices. It highlights something we said last December that, although the UK is a net importer of oil and, hence, overall the fall in oil prices can probably be expected to provide a net boost to the UK economy this year, the UK remains a significant oil producer and, therefore, we do not expect the boost to be particularly large. Surveys suggest that business investment intentions outside of the oil and gas sector remain high - and, thus, we are not particularly concerned. Housing investment in private sector dwellings rose 1.1% qoq.
