UK economy fears fuelled as growth revised

UK economy fears fuelled as growth revised

UK growth in the fourth quarter of last year has been revised down in official data, meaning 2017 expansion was only 1.7 per cent and underlining the challenges facing the economy as Brexit weighs.

The Office for National Statistics said yesterday that quarter-on-quarter growth in the final three months of last year was only 0.4 per cent, even weaker than the 0.5 per cent expansion it had estimated in preliminary data published in January.

And Howard Archer, chief economic adviser to the EY ITEM Club think-tank, highlighted the “largely unappetising” breakdown of the fourth-quarter gross domestic product figures.

UK business Investment was flat, and net trade proved a drag on growth as exports fell in spite of the pound’s post-Brexit vote weakness and imports surged. Sterling weakness boosts UK companies’ competitiveness in overseas Markets.

Household spending growth was only 0.3 per cent in the fourth quarter, even slower than the 0.4 per cent rate in the preceding three months.

The UK economy grew at a below-trend pace of 1.9 per cent over 2016 as a whole, and the 2017 expansion of 1.7 per cent represents a significant slowdown on that.

Economists believed, in spite of the weakness of the fourth-quarter growth figures, the Bank of England’s Monetary Policy Committee remained likely to raise UK base rates by a quarter-point to 0.75 per cent in May. Annual UK consumer prices index inflation remained stuck at three per cent in January, one percentage point greater than the two per cent target set for the Bank by the Treasury.

Mr Archer said: “The downward revision to UK GDP growth in the fourth quarter of 2017 may dilute expectations that the Bank of England will raise interest rates in May, but we suspect the MPC remains more likely than not to act then.”

He added: “With the Bank of England keen to gradually normalise monetary policy and the economy likely to see essentially stable growth during 2018, we expect two interest-rate hikes this year, in May and November. This also assumes earnings growth will trend up gradually.”


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