GDP figures dampen chances of rate rise
Figures showing the UK economy grew at its slowest pace in five years in the first quarter of the year have cast further doubt over a Bank of England (BOE) interest rate hike next month.
Theofficefornationalstatistics (ONS) said gross domestic product (GDP) grew by 0.1 per cent in its initial estimate for January to March, the weakest quarterly growth since the fourth quarter of 2012.
Chris Williamson, chief business economist at IHS Markit, said the figures showed that UK economic growth slowed to “near stagnation” in the first three months of 2018.
“They have cast further doubts on the health of the economy and seriously knocked the case for the BOE to raise interest rates again in May,” he said.
Experts had widely expected rates to rise above 0.5 per cent, with another rise having been factored in for November.
Earlier this month BOE governor Mark Carney said a rate rise was likely this year but any increases would be gradual.
The ONS figures showed that construction was the biggest drag on GDP – dropping 3.3 per cent over the first three months of the year, which was its most dramatic fall since the second quarter of 2012.
Manufacturing growth slowed to 0.2 per cent, though that was partially offset by a rise in energy production due to colder weather.
The UK’S powerhouse services sector – which accounts for about 80 per cent of the economy – was the biggest supporter of GDP growth in the first quarter, having increased by 0.3 per cent thanks in part to business services and finance.