Bri­tish econ­omy holds up against Brexit head­winds

Muscat Daily - - BUSINESS -

Lon­don, UK - Bri­tain’s econ­omy ad­vanced slightly in the sec­ond quar­ter, pulled higher by the key ser­vices sec­tor de­spite high in­fla­tion and un­cer­tainty over Brexit, of­fi­cial data showed on Wed­nes­day.

Bri­tain’s Gross do­mes­tic prod­uct (GDP) grew by 0.3 per cent be­tween April and June, a slight in­crease com­pared with the first quar­ter of the year, the Of­fice for Na­tional Statis­tics (ONS) said in a state­ment.

GDP had stood at 0.2 per cent growth be­tween Jan­uary and March, the ONS con­firmed, while the im­proved sec­ondquar­ter read­ing matched an­a­lysts’ con­sen­sus fore­cast.

The data comes shortly af­ter the In­ter­na­tional Mon­e­tary Fund (IMF) down­graded its 2017 growth es­ti­mate for Bri­tain on Brexit’s clouded out­look.

The ONS on Wed­nes­day said that UK growth in the sec­ond quar­ter had been ‘driven by serv- ices, which grew by 0.5 per cent’ largely thanks to the retail sec­tor.

‘Con­struc­tion and man­u­fac­tur­ing were the largest down­ward pulls on quar­terly GDP growth, fol­low­ing two con­sec­u­tive quar­ters of growth’, the ONS added in its state­ment.

At the week­end, the IMF re­vised down its 2017 GDP fore­cast for Bri­tain by 0.3 points to 1.7 per cent fol­low­ing weak­erthan-ex­pected ac­tiv­ity in the first quar­ter, while not­ing also that the im­pact of Bri­tain’s exit from the Euro­pean Union ‘re­mains un­clear’.

Bri­tain’s an­nual growth rate stood at 1.7 per cent in the sec­ond quar­ter, down from two per cent in the first, the ONS added on Wed­nes­day.

Bri­tain’s econ­omy is un­der pres­sure as high do­mes­tic in­fla­tion cuts con­sumer spend­ing and raises house­hold debt.

The rise in prices sits along­side weak av­er­age earn­ings growth in the coun­try, re­duc­ing the chances of an in­ter­est rate hike from the Bank of Eng­land (BoE) this year, that would mir­ror the pol­icy of mon­e­tary tight­en­ing in the United States.

“We do not ex­pect the BoE to change... at the Au­gust meet­ing, though the first hike is prob­a­bly get­ting a lit­tle closer,” noted Alan Clarke, head of Euro­pean fixed in­come strat­egy at Sco­tia­bank.

“An up­wards re­vi­sion to the Bank’s in­fla­tion pro­jec­tion and down­wards re­vi­sion to the un­em­ploy­ment rate will sig­nal that the door is still open to a rate hike later in the year, should the growth data im­prove,” he added in a client note.

The lat­est quar­terly read­ing of 0.3 per cent growth ‘con­firms that the econ­omy has lit­tle mo­men­tum be­cause con­sumers are en­dur­ing fall­ing real wages [on high in­fla­tion] and busi­nesses are hold­ing back from spend­ing due to Brexit risk’, said Sa­muel Tombs, chief UK econ­o­mist at Pan­theon Macroe­co­nomics.

Bri­tish GDP slowed in the first quar­ter af­ter out­put of 0.7 per cent in the fi­nal three months of 2016. Bri­tish in­fla­tion is mean­while be­ing sup­ported by a Brexit-fu­elled slump in the pound push­ing up im­port costs - although the an­nual rate man­aged a slow­down to 2.6 per cent in June from a near four year high of 2.9 per cent in May.

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