United Kingdom growth in first quarter falls to 0.1%, says ONS

Alicia Cross
April 28, 2018

The British economy slowed sharply in the first quarter of the year, official figures showed Friday, reining in expectations that the Bank of England will hike interest rates again next month and renewing concerns about the health of the economy less than a year from Brexit .

The UK's economy grew barely grew in the first quarter of 2018, according to the latest figures from the Office of National Statistics.

The slowdown from already modest quarterly growth of 0.4pc in the fourth quarter of 2017 was driven by a sharp fall in construction output.

This has prompted disappointment from the United Kingdom government who said that the GDP figures were "disappointing".

The Prime Minister's spokesman said the data was "clearly disappointing" but the economic fundamentals "are strong".

"Growth was stronger than many expected after the referendum".

Nomura economist George Buckley said he expected the pound to fall further in the short term but that it might recover if business surveys for April "show signs of bouncing back" and the government clarifies its position on agreeing a post-Brexit trading relationship with the EU.

"The agreement on the implementation period was an important step providing certainty for businesses".

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Those numbers are significantly better than what analysts expected, and up 43 percent from the same quarter previous year . The change took effect immediately for new members, and for existing members the changes were implemented on February 19.

"Our initial estimate shows the United Kingdom economy growing at its slowest pace in more than five years with weaker manufacturing growth, subdued consumer-facing industries, and construction output falling significantly." said Rob Kent-Smith, head of national accounts at the ONS.

At the same time, while the more extreme than usual weather in March of this year likely had a negative effect, its overall impact on growth is estimated to be small.

"Wth wages rising by 2.8% in February and Consumer Price Inflation falling to 2.5% in March, the MPC is under little pressure to hike rates until it has more data, particularly if inflation looks to be heading towards its 2% target".

Markets are now pricing in a 25% chance following the annoucement today.

The pound tanked in the wake of the release as traders "hastily" revised their interest rate expectations.

The figures show that production increased by 0.7 per cent with manufacturing growth slowing to 0.2 per cent.

The UK's powerhouse services sector - which accounts for around 79% of the economy - was the biggest supporter of GDP growth in the first quarter, having increased by 0.3% thanks in part to business services and finance.

The services industries were the largest contributor to gross domestic product growth, increasing by 0.3 per cent. Labour, in turn, argued that Tory austerity policies were hampering growth.

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