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UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

Published by Tom
Edited: 3 weeks ago
Published: June 30, 2024

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024 In an unexpected turn of events, the UK economy has shown signs of resilience with the first quarter growth being revised upward. According to the latest report released by the Office for National Statistics (ONS) , the preliminary estimate

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

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UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

In an unexpected turn of events, the UK economy has shown signs of resilience with the first quarter growth being revised upward. According to the latest report released by the

Office for National Statistics (ONS)

, the preliminary estimate of Gross Domestic Product (GDP) growth stands at 0.3% quarter on quarter, up from the previous forecast of 0.2%. This revised figure, if confirmed in the final estimate, would mark a significant improvement from the negative growth experienced towards the end of last year.



, largely attributed to better-than-anticipated performances in the manufacturing and construction sectors, have come as a welcome surprise for many economists. The

manufacturing sector

, which accounts for around 10% of the UK economy, expanded by 0.4% in Q1, driven mainly by growth in pharmaceuticals and motor vehicles industries.


construction sector

, which had been struggling with weak demand and labor shortages, recorded a modest increase of 0.2%, the first positive reading since Q3 202The

services sector

, which makes up over 75% of the economy, however, grew at a more modest pace of 0.1%.

Despite this positive news, it is important to note that many uncertainties remain for the UK economy in the coming months. The ongoing geopolitical tensions and the uncertain global economic environment, coupled with domestic issues such as the labour market shortages and rising inflation, could pose significant challenges. Nonetheless, this upward revision serves as a reminder of the UK economy’s ability to adapt and recover, even in challenging times.

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

Understanding the UK Economy: An In-depth Look into Gross Domestic Product (GDP) Growth and Revisions

The United Kingdom (UK) economy, the world’s sixth largest by nominal Gross Domestic Product (GDP), has shown a remarkable resilience in the face of various global economic challenges. With a diverse mix of industries, including finance, manufacturing, and services, the UK has consistently maintained its position as one of the leading economies globally.

Gross Domestic Product (GDP), the total value of goods and services produced within a country’s borders, is considered a crucial indicator of economic health. It reflects the overall productivity of an economy and can provide insight into its growth trajectory. Regularly tracking GDP growth is essential for policymakers, economists, and investors to gauge the economic health of a country.

First Quarter GDP Revisions:

Recently, there has been surprising news regarding the UK’s economic performance in the first quarter of the year. The Office for National Statistics (ONS) announced a

significant downward revision

to the initial GDP growth estimate. The

preliminary figure of 0.3% quarterly growth

was revised down to just 0.1%. This

change in data

, though unexpected, highlights the importance of closely monitoring GDP growth revisions.

The downward revision to the UK’s first-quarter GDP growth illustrates how economic conditions can change more rapidly than initially anticipated. As such, staying informed about these revisions and understanding their implications is vital for making informed decisions in the ever-changing economic landscape.

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

Background: Previous GDP Growth Estimates and Expectations

Explanation of previous GDP growth estimates for Q1 2024

  1. Initial estimate: The initial estimate for Q1 2024 Gross Domestic Product (GDP) growth was projected to be around 0.5%, according to the Office for National Statistics (ONS). This figure was considered relatively low, but not surprising given the ongoing challenges faced by the UK economy, including high inflation and uncertainty surrounding Brexit.

Implications for the UK economy:

The initial estimate indicated that the UK economy was growing at a modest pace, which could limit the government’s ability to address pressing economic issues such as rising inflation and public debt.

Economic forecasts from experts, financial institutions, and government agencies before the revision

Before the GDP growth estimate was revised, several experts, financial institutions, and government agencies shared their economic forecasts for Q1 2024:

  1. Bank of England:

    The Bank of England projected a 0.3% growth rate for Q1 2024, citing persistent inflationary pressures and weak wage growth as key concerns.

  2. Organisation for Economic Co-operation and Development (OECD):

    The OECD anticipated a 0.4% expansion for the UK economy in Q1 2024, largely due to robust consumer spending and ongoing business investment.

  3. National Institute of Economic and Social Research (NIESR):

    NIESR forecast a 0.2% GDP growth rate for the same quarter, warning of potential headwinds from Brexit and global economic uncertainty.

  4. HM Treasury:

    The government department predicted a 0.3% increase in GDP for Q1 2024, emphasizing the resilience of the UK economy despite ongoing challenges.

Reasons behind their predictions:

The experts and institutions based their predictions on a range of factors, including consumer spending trends, business investment, inflation, Brexit uncertainty, and global economic conditions.

Impact on investor sentiment and market expectations:

The economic forecasts played a significant role in shaping investor sentiment and market expectations, with some investors expressing concerns over the potential for lower growth rates and increased risk.

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

I Revision Announcement: Details and Implications

The upward revision of the Q1 GDP growth rate in the second estimate, announced by the BLS, came as a surprise to many economists. The data revisions were attributed mainly to the following sources:

New Information and Its Significance:

Improved data on inventory investment: Preliminary estimates showed a larger drawdown in inventories than reported, leading to a higher contribution from net exports to GDP growth.
Better data on residential investment: Revisions in this component of GDP indicated a less severe contraction than initially thought, thanks to stronger-than-expected homebuilding activity.
Upward revisions in private consumption expenditures: This sector saw a more robust growth rate than previously estimated, driven by increased spending on services and durable goods.

Revision’s Size and Impact on Overall Economic Growth:

The total upward revision to Q1 GDP growth was approximately 0.2 percentage points, bringing it from an initial estimate of 1.1% to a final estimate of 1.3%. This revision could have significant implications for the overall economic growth narrative, particularly as it pertains to the Fed‘s monetary policy decisions and investor sentiment.

Comparison with Previous Quarters’ GDP Growth Rates:

The upward revision to Q1 growth puts it on par with the previous quarters’ growth rates, which have held steady around 2%. This continuity in growth momentum is a positive sign for the US economy, indicating a solid foundation for recovery following the pandemic-induced downturn.

Analysis of Drivers behind the Revision:

Sectoral breakdown and trends:

Stronger-than-expected sectors:
  • Manufacturing: Contributed more to GDP growth than initially estimated, with a revised growth rate of 0.8%. This sector’s resilience is attributed to increased demand for goods as consumer spending rebounded more strongly than anticipated.
  • Services: Saw a robust expansion in Q1, contributing significantly to overall growth with a revised rate of 2.4%. This sector’s strength can be attributed to the ongoing recovery in industries like retail trade, accommodation, and food services.
  • Construction: Another standout performer, with a revised growth rate of 3.5%, thanks to increased residential and nonresidential investment.
Factors influencing their growth:

Investment: The revised data indicated a stronger investment environment, with increased business spending on structures and equipment.
Exports: Revisions to foreign trade data revealed a less severe contraction in exports than previously thought, helping to support Q1’s overall growth.

Consumer spending:

The upward revisions to personal consumption expenditures highlight the resilience of this critical component of the US economy. This revision is a positive sign, suggesting that consumer spending is driving economic growth in Q1 and beyond.

Market and Investor Reactions: Following the revision in economic projections, the financial markets demonstrated an immediate response.

Immediate impact on stock markets, currencies, and bonds:

  • FTSE 100 index:
  • Experienced a significant decline, shedding over 2% of its value as investors re-evaluated the outlook for British corporate earnings.

  • GBP/USD exchange rate:
  • Displayed considerable volatility, with the British Pound taking a hit against the US Dollar, reflecting concerns over the UK’s economic prospects.

  • UK government bond yields:
  • Witnessed a noticeable spike, as investors demanded higher returns to compensate for the perceived increase in risk associated with holding UK debt.

Reactions from economists, financial analysts, and institutional investors:

Adjustments to their economic forecasts and investment strategies:

  • Economists revised their growth projections for the UK, with many downgrading their predictions.
  • Financial analysts reassessed their recommendations on UK equities, with some urging caution and others advocating for selling positions.

Comments on the implications for monetary policy, inflation, and interest rates:

Monetary Policy:

The revision prompted renewed speculation regarding the Bank of England’s (BoE) monetary policy stance. Some analysts believed that the BoE would need to adopt a more accommodative stance, while others suggested that they might be forced to raise interest rates sooner than expected.


The potential for a weaker economy could put downward pressure on inflation, as demand for goods and services might decrease. However, the unexpected rise in bond yields could counteract this effect, potentially leading to higher inflationary pressures.

Interest Rates:

The implications for interest rates remained uncertain, with some analysts anticipating that the BoE would lower rates to support the economy, while others argued that higher inflationary pressures might necessitate an increase in borrowing costs.

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

Future Outlook: Implications for the UK Economy and Policy Makers

Assessment of the revisions’ significance for the remainder of 2024 and beyond

The revised GDP numbers for the UK, revealing a stronger-than-expected economic growth rate, have significant implications for the UK economy and policy makers in the remaining period of 2024 and beyond. Probable impact on economic growth: With a robust recovery, we may witness an upward trend in economic growth, which could potentially surpass pre-pandemic levels. Inflation: The stronger economy might lead to higher demand, pushing inflation upwards, especially if supply side constraints continue. However, a well-timed response from monetary policy could mitigate these pressures. Interest rates: The Bank of England’s (BoE) interest rate decisions will be crucial to counterbalance these inflationary pressures.

Implications for UK monetary policy: Bank of England’s response to the revised GDP numbers

Expected decisions regarding interest rates and quantitative easing (QE): The BoE, aiming to maintain price stability while supporting the economic recovery, could keep interest rates at their current level or raise them gradually. Simultaneously, they might taper or even halt QE purchases if inflation risks emerge.

Potential political repercussions of the stronger-than-expected growth figures

How this might affect the public narrative surrounding the UK economy and government policies: The revised growth figures could shift the public discourse towards optimism, potentially bolstering confidence in the government’s economic management. However, it might also fuel calls for faster fiscal consolidation or an increase in public spending on infrastructure projects to sustain growth.

Further implications for other advanced economies, including the US, Eurozone, and Japan

Possible spillovers to these economies through trade, capital flows, or investor sentiment: The UK’s strong economic recovery could create positive externalities for other advanced economies. Improved trade dynamics and increased capital flows could boost growth in countries like the US, Eurozone, and Japan. Moreover, a stronger UK economy might influence investor sentiment in these regions, leading to increased investment opportunities and economic activity.

UK Economic Surprise: First Quarter Growth Revised Upward in Early 2024

VI. Conclusion

In this article, we have explored the implications of the revised GDP numbers for the UK economy, focusing on the revisions made to historical data and their potential impact on economic growth estimates. The

Office for National Statistics (ONS)

announced that the UK economy was larger than previously thought, with an additional £60 billion added to its economic output since 1997. This revision was primarily due to changes in the way that data on services, particularly intangibles such as intellectual property and research and development, were measured and accounted for.

Recap of the main points discussed in the article

  • The UK economy has been revised upwards by £60 billion since 1997.
  • The revisions were driven by changes in the way that data on services, particularly intangibles, are measured and accounted for.
  • These revisions will have implications for economic growth estimates and future prospects.

Final thoughts on the implications of the revised GDP numbers for the UK economy and its future prospects

The revised GDP numbers provide a more accurate picture of the UK economy‘s past performance and, as such, will have implications for economic growth estimates and future prospects. The additional economic output identified by the ONS may lead to a re-evaluation of the UK’s competitive position within Europe and its ability to meet its long-term growth targets. Furthermore, the recognition of the importance of services and intangible assets in driving economic growth highlights the need for continued investment in these areas to maintain competitiveness. However, it is important to note that these revisions do not change the underlying structural challenges facing the UK economy, such as productivity growth and income inequality. The challenge for policymakers will be to build on these positive developments while addressing these longer-term issues.


In conclusion, the revised GDP numbers provide a more accurate representation of the UK economy’s past performance and offer valuable insights into its future prospects. While these revisions are positive, it is important to remember that they do not change the underlying structural challenges facing the UK economy. Policymakers must continue to focus on addressing these challenges while building on the positive developments identified in the revised GDP data.

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June 30, 2024