UK economic growth slows to 0.3%

News


28 Apr, 2017

UK economic growth slows to 0.3%

The UK's so far resilient economy since last year's Brexit vote is perhaps beginning to show signs of fatigue, after initial GDP estimates for the first quarter of the year have revealed a worse-than-expected growth of just 0.3%.

Friday's figure is just the initial estimate and could be revised in the coming months. However, it highlights a marked slowdown from the better-than-expected 0.7% growth achieved in the last quarter of 2016.

Economists had been expecting a slowdown in growth of 0.4%. According to the Office for National Statistics, a drop-in retail sales were the biggest culprit behind slower growth.

A fall in retail sales correlates to a rise in inflation in the UK, which currently stands at 2.3%. The problem occurs when one looks at wage growth, which stands below inflation at 2.2%. Therefore, rising inflation coupled with stagnating wages has lowered consumer confidence thus adversely effecting retail sales.

The rise in costs come at a time when separate figures have highlighted the lowest levels of household savings on record coupled with historically high levels of unsecured borrowing.

Sky News economic editor Ed Conway states that the slowdown in growth so close to a General Election could be one of the reasons why Chancellor Philip Hammond has seemingly chosen to opt out of doing interviews and or appearing on a "sacramental tour of a factory or workplace".

Over the last decade, after GDP figures have been released, there has been a tradition of Chancellors doing a round of interviews with Britain's TV broadcasters to explain the numbers to the public.

However, the latest Chancellor has instead recorded a few short words with a single broadcaster, to be shared with all the channels.

Elsewhere, in a statement the ONS said: "There were falls in several important consumer-focused industries, such as retail sales and accommodation; this was due in part to prices increasing more than spending".

It reported an expansion of just 0.3% in the dominant services sector - with construction output growth of only 0.2%.

Elsewhere, growth in vehicle production - with UK-made cars more attractive overseas as a result of sterling's weakening - helped the manufacturing sector raise output by 0.5%.

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