United Kingdom economy grows at slowest pace in the last five years

Apr 29, 2018, 13:54
United Kingdom economy grows at slowest pace in the last five years

Rob Kent-Smith, head of national accounts at the ONS, said: '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'.

ONS figures showed that construction was the biggest drag on GDP, dropping 3.3 per cent over the first three months of the year, which was its most dramatic fall since the second quarter of 2012.

The UK's GDP growth has dropped dramatically in the first quarter of 2018.

"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.

The statistics office said that while the inclement weather was a factor, the slower pace of growth could not entirely be attributed to the onslaught of spring snow.

The "Beast from the East" and subsequent storms effected retail sales but the impact on GDP was "generally small, with very little impact observed in other areas of the economy".

John McDonnell, Labour shadow chancellor, said: "The truth is that the last eight years of Tory economic failure has allowed our economy to be left exposed".

In the final three months of 2017, Britain recorded the slowest year-on-year growth of any major advanced economy. The economy had expanded 0.4% in the fourth quarter.

The ONS said that while the weather had some impact on the economy, especially in construction and retail, this was offset by boosts to energy supplies and online sales, meaning the overall effect was limited.

Manufacturing growth slowed to 0.2% while production increased 0.7% and energy production rose due to the below-average temperatures.

However, this was reduced to 50% after BoE governor Mark Carney's comments last week that a rate rise in May was "not a done deal".

Early reactions from analysts suggest that the poor GDP number has ended any hope that the Bank of England might raise interest rates at its May meeting. Friday's data is another setback.

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.

This chimes with the fact that many Eurozone countries, notably France, which also released GDP figures this morning, were similarly below expectations.

Samuel Tombs of Pantheon Macroeconomics added that the "chance of a May rate hike is now close to zero".

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