Unexpected slowdown in UK GDP

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This was in marked contrast with the final quarter of past year, which saw 0.7% growth.

That is based on the latest statistics from the Organisation for Economic Co-operation and Development, which show the European Union grew by 0.5% in the first three months of this year, marking 16 consecutive quarters of positive growth.

Revised data published yesterday by the Office for National Statistics showed United Kingdom gross domestic product (GDP) rose by just 0.2 per cent quarter-on-quarter during the opening three months of this year.

Growth in the sector remained positive largely due to strong performances by business and financial services, but the overall slowdown contributed 0.06 percentage points to the downward revision to GDP. And the key services sector is now calculated to have grown by only 0.2 per cent in the opening three months of this year, rather than by 0.3 per cent as estimated previously.

However, Baxter says the United Kingdom can find some optimism in PMIs pointing to a pick-up in April and the retail sector showing some improvement too, although it is yet to be determined how much of this is due to unseasonably good weather in April and the timing of Easter. Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly. Business investment picked up somewhat in the first quarter and government investment was noticeably stronger, helping to offset the consumer slowdown.

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"Excluding valuables, net trade still provided a drag on growth".

The ONS has revised GDP growth down to 0.2 per cent in its second estimate, compared to 0.3 per cent in its preliminary estimate in April. Inflation hit its highest level in almost four years last month at 2.7 per cent, as the Brexit-hit pound, electricity price hikes and rising air fares tightened the squeeze on household spending. "Sluggish household spending growth, a effect of the squeeze on real incomes starting to kick in, and some pull back on export growth after an impressive end to past year", she said. Household spending has played a key part in United Kingdom growth in recent times, but sterling's plunge since the Brexit vote has triggered the first real-terms fall in average earnings for about two-and-a-half years. For those on the hunt for some good news in the data, it was to be found in the investment numbers.

Britain's economy grew 1.8 per cent previous year. "Still, we'll need to see this rebound continue and strengthen for longer-term productivity prospects to improve".

"Just as expected, higher inflation is squeezing incomes and spending".

"UK growth is likely to tilt away from the consumer towards exports, manufacturing and investment this year". Britain's economy grew 1.8 percent a year ago, one of the fastest rates among the world's seven largest advanced economies.

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