UK Q1 GDP quarterly growth confirmed at 0.7 pct, revised up to 2.9 pct yr-on-yr

May 25, 2007 - The services sector helped the UK economy expand above its long-run average for the fifth quarter running in the first three months of the year, official figures confirmed today.

In its second estimate for the first quarter, the office of National Statistics said the UK economy grew by 0.7 pct from the previous quarter.

That was unrevised from the previous estimate and in line with expectations.

This is the third quarter running that the UK has grown at a 0.7 pct rate and means that growth has now been above its trend rate -- estimated by most commentators at between 0.6-0.7 pct -- for five consecutive quarters.

Above-trend growth has been one of the major factors behind the Bank of England's decisions to raise borrowing costs on four occasions between last August and May. Interest rates are now at a six-year high of 5.50 pct and are expected to rise further, possibly as soon as next month.

This view may be bolstered by the rise in the GDP data's price component. According to the statistics office the deflator rose by an annual 3.2 pct, the highest rate since the fourth quarter of 2003.

The income indicator was also high, with compensation of employees rising by 2.0 pct in the first quarter on the back of strong growth in average earnings, mainly driven by city bonuses. The rate is up from 0.9 pct in the previous quarter and the highest rate since the fourth quarter of 2004.

Today's data also showed that GDP rose by 2.9 pct on a year-on-year basis, up on the previous estimate of 2.8 pct and above expectations for an unchanged estimate. However, it was down on the 3.0 pct growth recorded in the fourth quarter.

On the expenditure side of the accounts, the statistics office said household expenditure rose by 0.6 pct during the quarter after rising 1.0 pct in the fourth quarter.

Growth was driven by consumption of goods and services.

On a year-on-year basis, household expenditure was 3.1 pct higher on the same quarter in 2006, and up on the fourth quarter's equivalent of 2.5 pct.

Meanwhile, government expenditure rose by 0.4 pct in the latest quarter for a 2.4 pct annual gain.

The statistics office revealed that growth in the fourth quarter was again driven by the services sector, which makes up 74 pct of overall GDP.

On a quarter-on-quarter basis, the services sector grew by 0.8 pct, down on the 0.9 pct recorded in the previous quarter. On an annual basis, growth in the sector was 3.5 pct, unchanged on the previous quarter's rate.

All sub-sectors within the services sector did well, with distribution, hotels and catering up a quarterly 0.9 pct for a 3.2 pct annual gain, transport, storage and communications up 1.4 pct and 3.6 pct, business services and finance up 1.0 pct and 5.1 pct, and government and personal services up 0.4 pct and 1.6 pct.

The picture on the industrial front was less rosy, however.

Industrial production, which accounts for around 18 pct of UK GDP, was unchanged on the previous quarter following the 0.2 pct quarterly decline recorded in the fourth quarter of 2006.

On a year-on-year basis, industrial production saw output rise by 0.2 pct, down on the fourth quarter's 1.0 pct.

Within the total, manufacturing output, which accounts for around 14 pct of UK GDP, was down 0.3 pct from the fourth quarter. In that quarter, output was unchanged. Year-on-year, manufacturing output was up 1.4 pct, down on the 2.7 pct recorded in the fourth quarter of 2006.

Meanwhile, extraction output was up a quarterly 1.3 pct for a 6.4 pct annual fall, while utilities output rose a quarterly 1.3 pct for a 3.3 pct year-on-year decline.

Elsewhere, construction output, which accounts for around 6 pct of GDP, saw output rise 0.8 pct quarter-on-quarter for the second quarter running, giving an annual increase of 2.7 pct after 2.9 pct growth in the fourth quarter.

Finally, agriculture was revised down 0.1 percentage point to a 0.5 pct quarterly rise against the 0.5 pct drop recorded in the fourth quarter. On a year-on-year basis, agriculture output, which accounts for 1 pct of GDP, was down 0.8 pct against a 1.9 pct decline recorded in the fourth quarter.

Elsewhere, the statistics office said gross fixed capital formation, a broad measure of business investment, rose by 1.7 pct during the quarter, driven by a 8.0 pct rise in government investment, and sharply higher than the 2.6 pct increase seen in the fourth quarter.

On a year-on-year basis, gross fixed capital formation was 7.7 pct higher.

Business investment, which accounts for around 60 pct of gross fixed capital formation, fell by 1.3 pct from the fourth quarter, down from growth of 4.5 pct increase the previous quarter. On a year-on-year basis, business investment was up 9.6 pct.

Finally, the statistics office said net trade had no contribution to GDP.

German Q1 final GDP growth 0.5 pct vs Q4

May 24, 2007 - German GDP grew 0.5 pct in seasonally, price and calendar-adjusted terms in the first quarter compared with the fourth quarter of last year, according to final figures from the Federal Statistics Office.

The announcement confirmed preliminary data released on May 15.

On a year-on-year basis, first-quarter GDP was up 3.3 pct in unadjusted terms and was 3.6 pct higher after adjusting for calendar effects. This also confirmed the preliminary results.

The figures matched forecasts by economists surveyed by Thomson Financial News ahead of the release.

GDP growth during the quarter was driven by domestic demand after delayed delivery of data led to 'excessively high' fourth-quarter export figures, the Statistics Office said.

Domestic demand accounted for 2.5 percentage points of the 0.5 pct quarter-on-quarter figure, while net exports contributed a negative figure of 2.0 percentage points.

In the fourth quarter, GDP had increased 1.0 pct quarter-on-quarter.

First-quarter imports rose 3.7 pct, while exports dropped 1.2 pct, with overall domestic demand increasing 2.7 pct.

Meanwhile, government spending grew 2.1 pct, while consumer spending dropped 1.4 pct.

Investment rose 4.2 pct, of which construction investment expanded by 3.5 pct and investment in machinery and equipment rose 5.5 pct.

Norway mainland Q1 GDP growth 1.4 pct, up from revised 1.0 pct in Q4

May 23, 2007 - Norwegian mainland GDP growth rose to 1.4 pct in the first quarter from a revised fourth quarter figure of 1.0 pct, Statistics Norway said.

The driving forces behind the growth in quarterly GDP were a rise in overall employment combined with an increase in household consumption, the organisation added.

Additionally, the statistics office said, most industries experienced strong growth during the quarter, with manufacturing output rising by 0.5 pct, and private services expanding by 2.1 pct.

The fourth quarter GDP was revised downwards from the previously-announced 1.2 pct due to new information about Norwegian oil and gas extraction.

Spain Q1 GDP up 1.1 pct from Q4; up 4.1 pct yr-on-yr

May 23, 2007 - Spain's GDP grew 1.1 pct in the first quarter from the fourth and was up 4.1 pct from a year earlier, the National Statistics Institute (INE) said.

The figures are slightly above the preliminary figures of 1.0 pct and 4.0 pct and higher than the fourth quarter, when GDP expanded at an annual rate of 4.0 pct.

In a statement, INE said domestic demand contributed 4.8 percentage points to GDP growth in the first quarter, slightly lower than the 4.9 pct registered in the fourth, while the negative contribution from the external sector narrowed to 0.7 pct in the first quarter from a negative 0.9 pct in the fourth.

Consumer spending in homes reduced its contribution to growth to 3.5 pct from 3.7 pct 'in line with the wage growth, employment and consumer confidence,' INE said, adding that spending in services was higher than spending in goods.

Investment in construction slipped to 5.6 pct from 5.7 pct, due to a fall in residential and non-residential construction, though this was counter-balanced slightly by 'strong' growth in infrastructure work.

Employment grew at an annual rate of 3.0 pct, down slightly on last quarter, implying net job creation of 555,000 full-time posts.

Hong Kong GDP Up 5.6% In Q1

May 18, 2006 - Hong Kong's Gross Domestic Product rose 5.6% in real terms in the first quarter of 2007 over a year earlier, compared with the 7.3% growth in the previous quarter, the Census & Statistics Department has announced.

Analysed by sector and on a year-on-year comparison, net output in all service sectors taken together rose 7.6% in real terms, after 9.6% growth a quarter earlier.

Net output in the wholesale, retail, import and export trades, restaurants and hotels sector grew 7.7% in real terms, compared with the 10% rise in the previous quarter.

Growth in local consumer demand, robust external trade and the expansion of offshore trade and inbound tourism all contributed to the rise, the Department said.

Net output in the transport, storage and communications sector rose 5% in real terms after a 9.4% rise in the previous quarter. Robust external trade underpinned the growth in transport and storage services. The net output of the financing, insurance, real estate and business services sectors rose 15.2% in real terms, compared with the 17.4% increase in the fourth quarter of last year.

The growth impetus came mainly from banking services, on the back of a substantial rise in commission and service income. Also relevant was a leap in the net output of stock brokerage companies, underpinned by a significant rise in stock market turnover.

Net output in the community, social and personal services sector rose 1.3% in real terms, following the 3.2% rise in the previous quarter.

A fall in net output was seen in the local manufacturing sector. It recorded a 1.5% fall in real terms in the first quarter, compared with the decrease of 1.4% in the fourth quarter.

In the construction sector, net output fell by 4.6% in real terms, following the decrease of 3.1% in the fourth quarter. The fall was mainly attributable to a lack of large infrastructure projects in progress.

Net output in the electricity, gas and water sector rose 1.1% in real terms, compared with the 4% fall in the fourth quarter of 2006.

Japan Q1 GDP slows as corporate spending falls

May 17, 2007 - The Japanese economy expanded at just half the previous quarter's pace in the three months to March as corporate spending fell for the first time in five quarters, possibly putting off any plan by the central bank to raise interest rates in the near term, economists said.

But the decline in capital spending, prompted by decreased output at factories as clients deal with excess inventories, may be a blip, according to economists, and could rebound as demand overseas remains firm.

The Cabinet Office said gross domestic product grew 0.6 pct in real terms in the January-March quarter from the previous three months and at an annualized rate of 2.4 pct. It was the ninth straight quarter of expansion for the world's second-largest economy.

The figures were slightly below market expectations. Ten economists polled by XFN-Asia were looking for quarter-on-quarter expansion of 0.7 pct and annualized growth of 2.6 pct, on average.

In the three months to December, the economy expanded by a revised 1.2 pct from the previous quarter, or at a revised annualized pace of 5.0 pct.

'Today's preliminary GDP data confirmed that Japan's economic recovery remains intact,' said Masayuki Gotoh, senior economist at the Cabinet Office.

For the fiscal year ended March, GDP grew 1.9 pct, matching the government's target, but slower than the 2.4 pct expansion in the previous fiscal year.

The slower growth came as domestic demand increased a marginal 0.2 pct in January-March from the previous quarter compared to the 1.1 pct jump in the December quarter, and non-residential investment marked its first sequential drop in five quarters.

Non-residential investment, virtually equivalent to corporate spending, fell 0.9 pct quarter-on-quarter

after a 2.3 pct jump in the previous quarter. Non-residential investment subtracted 0.1 percentage point from overall GDP, after having added 0.4 percentage point in the previous quarter.

'While spending by construction equipment makers was brisk, the capital outlays of electronics/telecom equipment makers declined while investment by general machinery makers, automakers and software developers slowed,' Gotoh said.

NLI Research Institute senior economist Taro Saito thinks the decline in capital spending was temporary, saying record profits at most Japanese companies, plus the yen's weakness, should boost capital outlays going forward.

The drop in capex was not surprising given the rapid increase during the December quarter, said Masamichi Adachi, senior economist at JP Morgan Securities.

'But given solid exports, a weak yen and continued profit growth, it would be difficult to think that the expansion in non-residential investment will fall part,' Adachi said.

While capital spending dropped, private consumption remained healthy, rising 0.9 pct sequentially in the March quarter, after growing 1.1 pct in the previous quarter.

Economists attributed the continued growth in consumption to the warm weather during the first three months of the year which spurred consumers to spend more on spring clothing and dine at restaurants.

But the slowdown in wage increases may affect growth in consumer spending in the next quarters, said Tokai Tokyo Securities chief economist Mitsuru Saito.

Nominal compensation of employees rose 0.2 pct year-on-year in the January-March quarter, the slowest pace since April-June 2005 when it rose 0.8 pct.

In terms of external demand, Japan's exports were brisk in the March quarter with net exports -- or the difference between exports and imports -- contributing 0.4 percentage point to GDP, up from 0.1 percentage point in the last quarter of 2006.

That trend could continue even if demand in the US -- still mostly Japan's biggest market -- slows down, said Informa Global Markets (Japan) economist Kenji Arata.

'Brisk exports to China and India whose economies are growing rapidly can compensate for the expected decline in exports to the US,' he said.

Overall, the latest GDP data suggest that the Japanese economy continues to recover at a modest pace and that may hold off any interest rate hike in the near term, economists said.

Still some economists think the next rate hike may take place before the end of this year, citing further progress in Japan's battle against deflation.

The GDP deflator, which measures the degree of deflation, was down 0.2 pct year-on-year in January-March, the smallest fall since April-June 1998 when the deflator dropped 0.1 pct. In the three months to December, the GDP deflator declined 0.5 pct from the previous year.

'While my main scenario is that the BoJ will hike interest rates in the October-December quarter, depending on what happens to crude oil prices, we cannot rule out the possibility of an earlier rate increase,' Informa's Arata said.

The central bank has kept its overnight call rate target, or the interest rate commercial banks charge each other for short-term funds, at 0.5 pct since it raised it from 0.25 pct in February.

(1 usd = 120.79 yen)

Portugal GDP positive but economy only 'halfway' to matching EU growth

May 8, 2007 - Recent upwardly revised GDP forecasts for Portugal from the central bank and the European Union are positive, but the economy is only halfway to achieving its goal to match the EU average for GDP growth, Economy Minister Manuel Pinho said.

Speaking today at a conference hosted by Exame magazine, Pinho said: 'What we saw in Portugal is rare in public finances, we reduced the deficit and the GDP growth accelerated.'

Pinho said the fact that the Bank of Portugal economic climate indicator is at its highest level since July 2002 and that the PSI 20 index is at the highest point since September 2000 are good indicators of future growth.

'These results speak for themselves, but we are only halfway,' Pinho said.

Yesterday, the European Commission revised upwards Portugal's GDP growth estimates to 1.8 pct in 2007 from 1.5 pct earlier, and to 2.00 pct in 2008 from 1.7 pct earlier.

Last month, the Bank of Portugal raised its 2008 GDP growth forecast to 2.4 pct from 2.1 pct previously and projected an acceleration in growth to 3.0 pct in 2009.