Economy set to feel chill of the beastly easterly
THE Beast from the East hit Britain’s economy in the first quarter, official figures are expected to show this week.
Experts at the EY ITEM Club are predicting gross domestic product (GDP) could be cut in half from 0.4 per cent in the fourth quarter to as low as 0.2 per cent when the Office for National Statistics reveals data on Friday.
The preliminary figures will shed light on the economic cost of heavy snowfall that brought parts of Britain to a standstill last month, and will play a part in determining the course for interest rates this year.
“The severe weather seen at the end of February and the first half of March appears to have weighed down significantly on economic activity at the beginning of the year,” said the Item Club.
“We expect GDP growth in the first quarter was dragged down to around 0.2-0.3 per cent quarter-on-quarter.” The forecast chimes with that of PricewaterhouseCoopers and the National Institute of Economic and Social Research, which have pencilled in similar levels of reduced growth.
Retailers bore the brunt of the extreme weather, which saw people stay away from the high street. This was reflected in official figures out last week, which showed that retail sales recorded their biggest quarterly fall in a year.
The Item Club predicts GDP will bounce back to 0.5 per cent in the second quarter as some of the economic activity lost to the severe weather is made up.
However, for the year it expects GDP to grow by 1.6 per cent in 2018, a downgrade from an earlier forecast of 1.7 per cent, which would have matched 2017’s figure.
Howard Archer, chief economic adviser to the EY ITEM Club, described British economic growth as “steady but uninspiring”, and warned over Brexit risks and a potential hike in interest rates over 2018.
He said: “The UK economy is chugging along at a fairly steady, but uninspiring rate. Inflation continues to drop and we expect a tight jobs market to deliver some uptick in pay growth.”
‘The economy is chugging along at a steady rate’