Pound tumbles as data shows United Kingdom growth has stalled

Posted April 28, 2018

Gross domestic product (GDP) grew by 0.1% between January and March, according to an initial estimate from the Office for National Statistics.

The Beast from the East did have an effect on retail sales and the construction industry, but this was relatively small, and there was even less impact on other sectors of the economy.

ONS spokesman Rob Kent-Smith 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".

The GDP growth fell far below expectations of 0.3% for Q1 2018 and it falls short of the 0.4% recorded between October and December 2017.

In year-on-year terms, the pace of growth slowed to 1.2 percent, its weakest since the second quarter of 2012 and at the bottom end of economists' forecasts in a Reuters poll.

He said: "The news casts further doubt over a May interest rate rise".

Even before Friday's data, many economists began to feel the BoE might be getting cold feet about a rate rise to curb inflation, especially after Governor Mark Carney last week alluded to the possibility of postponing any hike.

"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".

Following the news the pound was down nearly one and a half cents against the dollar at $1.3775.

The economic release is due out at 0830 GMT and is expected to show growth slowing modestly, owing in part to bad weather, which hurt retail and construction. The major factors which contributed to this were falls in construction, a weakening in the growth of manufacturing output, and an unhappy trend of subdued growth in the services industry.

Scotland's annual GDP growth for 2017 was 0.8 per cent higher than the previous 12 months but less than half that of the United Kingdom economy, which by comparison grew by more than double, at 1.8 per cent, over the same period.

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

"It's clear to everyone except Philip Hammond that our economy is in need of increased investment and working families are struggling with the cost of living and the burden of increasing household debt". "The 0.1% quarterly rise was below the consensus estimate and the MPC's forecast of 0.3%", Paul Hollingsworth, a senior United Kingdom economist at Capital Economics said in an email.