‘Fresh official data reveal how the economy slowed sharply at the start of the year as higher prices squeezed households.’ — Chris Williamson, IHS Markit
The UK economy showed a slow growth pace in the first quarter of the year, the weakest performance among European and G7 countries. The ONS reported that the country’s GDP growth matched previous estimates of 0.2% in the Q1 of 2017, compared to a 0.7% increase in the Q4 of 2016. Both business services and construction sectors contributed to the Q1 UK economic expansion. The British economy, which successfully withstood in the Brexit vote aftermath, started to lag behind other developed countries. Economic growth in the Q1 weakened amid a slowdown in the consumer-focused industries, such as accommodation and retail sales, as well as diminished household spending power. Consumers’ real income faced the most prolonged squeeze as price growth beat wage growth. Overall, trends in the main areas of the country’s economy are set to be crucial for the Bank of England to decide whether to raise its key interest rates in the second half of the year or not. However, higher demand for UK exports and stronger manufacturing activity can potentially offset weak consumer spending.
