British first quarter growth probably not as bad as reported

April 27, 2016

A man walks up steps in the City of LondonBritish economic growth slowed to 0.4 percent at the start of the year, a preliminary release showed as expected on Wednesday, but the real picture may well be better.

The Office for National Statistics only used January and February data for their calculation and 2016 was the worst start to a year in financial markets since 2008. March should have seen an improvement.

“February data will probably be the worst performing month in Q1 and might have caused the typically conservative ONS to lowball the March estimates,” said Kallum Pickering, senior UK economist at Berenberg.

“With today’s data, we suggest particular caution.”

One set of March data available, Markit’s all-sector Purchasing Managers Index which covers service firms, manufacturers and the construction industry, rose to 53.7 from February’s near three-year low of 52.9.

And history suggests an upward revision as well. In 13 of the last 20 quarters the first estimate has been revised up by the time of the final release, Reuters analysis showed. Once by almost a whole percentage point.

Only six were revised down and one was unchanged.

GDP

– Additional reporting by Deepti Govind

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