More clouds gather over UK economy
london — Britain’s economy has struggled to gain momentum after a slow start to 2017, according to data published on Friday which raised questions about the chances of the Bank of England raising interest rates this year.
Output by British factories and the construction sector unexpectedly shrank in May, on top of weak spending by consumers who are feeling the pinch from accelerating inflation since last year’s vote to exit the European Union.
The signs of continued weak growth came as businesses pressed British Prime Minister Theresa May and her government to negotiate a smooth Brexit in two years’ time, saying an abrupt departure would deter investment.
An employers group said on Thursday that Britain should stay in the EU’s single market for a transition period. Executives from leading British companies, meanwhile, were due to meet Brexit minister David Davis on Friday.
Sterling dipped below $1.29 after Friday’s data and hit its lowest level since June 28. British government bond prices rose.
Analysts said the economy was now unlikely to recover much speed in the second quarter, after expanding by just 0.2 per cent in the first three months of the year.
“It’s all building up a pattern here that says the economy is clearly losing momentum,” said Peter Dixon, economist at Commerzbank. “It’s not pointing to a particularly dynamic second quarter. Under those circumstances, the timing of the hawks on the Monetary Policy Committee pushing for a rate hike doesn’t look great.”
Growth in the second quarter was likely to edge up only slightly to 0.3 per cent, the National Institute for Economic and Social Research, a leading think-tank, said. The Office for National Statistics said manufacturing output edged down by a monthly 0.2 per cent, confounding forecasts for a 0.5 per cent rise in a Reuters poll of economists. — Reuters