GDP quarterly national accounts show people grew worse off in January to March 2026, and saved less too The UK’s 0.6% growth in January-March was “a decent start to 2026”, reports Investec’s Philip Shaw. However…. Attention will soon turn to the scale of any negative impact of the recent surge in energy prices. Indeed we envisage growth coming close to a halt in Q3, although the level of the saving ratio will give households in aggregate a cushion to absorb cost increases without an abrupt interruption in spending. Thereafter the unwinding of the energy price spike should form a tailwind and help to support expenditure and economy activity more widely. We have lowered our forecast of the peak in inflation over the remainder of the year from 4.0% to 3.1% though, thanks to the sharp decline in energy prices and to May’s CPI data, which showed evidence of considerable disinflationary pressures in the pipeline prior to the Iran war. We feel more confident now that the 2.0% target will be in sight by end-2027. The income side of the national accounts showed that real household disposable income dropped by 0.8% quarter-to-quarter in Q1, cutting a chunk from the 1.3% gain in Q4 2025, as higher inflation ate into real household earnings. Sticky inflation over the coming year—despite the recent drop in energy prices—will mean that real household disposable income grows only slowly for the rest of the year. The household saving rate was estimated to have fallen to 8.9% in Q1, down from 9.6% in Q4 2025, as households smoothed through a fall in real incomes, keeping spending going. The saving rate still remains well above its 2015-to-2019 average of 6.5%, and the latest money and credit data for May—released yesterday—suggest that households are willing to save less over the coming months in order to keep smoothing their spending through the energy price shock. So, we continue to think that consumers’ spending can help GDP growth hold up over H2. Continue reading...
(Associated Medias) - All rights reserved