Thursday, 25 April, 2019

Pound slumps as United Kingdom growth slows to five-year low

The figures are a blow for Theresa May who has said she should be trusted with the UK economy over Labour Britain's economy nearly grinds to a halt growing by just 0.1% in the past three month as the construction industry takes
Ginger Lawrence | 29 April, 2018, 00:31

GDP growth plunged to just 0.1pc in the first quarter of this year compared to the last quarter of 2017.

Sterling fell by about one per cent against both the U.S. dollar and the euro as market expectations that the Bank of England would raise interest rates in May for only the second time since the 2008 financial crisis reduced. The pair touched an intraday low of $1.3803, hitting its lowest level since March 9, according to FactSet data. Sterling has been all over the place in recent weeks, tumbling from close to $1.44 to $1.38.75 (pre GDP announcement this morning, 8.45am), not helped by a stronger dollar.

Britain's economy grew by just 0.1 percent in the first quarter of 2018, well below the BoE's prediction of 0.3 percent and at the bottom end of economists' forecasts in a Reuters poll, official data showed on Friday.

Jacob Deppe, head of trading at Infinox, commented: "That only a small amount of the fall in first quarter GDP can be blamed on the "Beast from the East" will be the big takeaway from today's data".

GDP growth was 0.1%, down from 0.4% in the previous quarter, driven by a sharp fall in construction output and a sluggish manufacturing sector.

Manufacturing growth slowed to 0.2% while production increased 0.7% and energy production rose due to the below-average temperatures.

Unions and economic analysts have laughed off the claim, with the ONS saying our service industries were "broadly unaffected" by the bad weather.

However, the ONS noted that longer term trends point to weakening growth in the services sector.

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The preliminary figures from the Office for National Statistics (ONS), which were much worse than economists and markets had predicted, showed the weakest growth since 2012.

The economy had expanded 0.4% in the fourth quarter.

"While the snow had some impact on the economy, particularly construction and some retail, overall effect was limited with the bad weather actually boosting energy supply and online sales".

-Weaker than expected figure will kill off May interest rate rise.

This marked the weakest quarterly growth since the fourth quarter of 2012.

The economic cost of the heavy snowfall will also play a part in determining the course for interest rates this year."Mark Carney set the cat among the pigeons by stating that data in Q1 had been "mixed" and that this would be discussed at the MPC's May meeting", Investec said.

Following decisive steps in the Brexit negotiations last month after the United Kingdom and European Union agreed a transition deal, and the BoE's more hawkish stance at the last MPC meeting in February, markets were pricing in a 90% chance of a May hike.