Published: Thu, July 27, 2017
Economy | By Melissa Porter

United Kingdom economy sees slowest H1 growth rate since 2012

United Kingdom economy sees slowest H1 growth rate since 2012

Of the three major sectors of the economy, only services grew during the three-month period which ended in June; it grew by 0.5%, while industrial production fell by 0.4% and construction shrunk by 0.9%.

On Monday the International Monetary Fund downgraded its 2017 economic outlook for Britain by more than any other rich nation, predicting growth of 1.7 percent compared with an earlier 2.0 percent estimate.

Growth was driven by services, mainly retail trade and film production and distribution, which grew by 0.5% compared with 0.1% in Q1.

Howard Archer, chief economic advisor to the EY Item Club, said: "The second half of 2017 looks likely to remain very hard work for the United Kingdom economy, resulting in ongoing limited growth".

The 0.3 per cent quarterly figure means annual GDP growth to the end of June is now 1.7 per cent, down from 2 per cent in the year to March 31.

Britain's economy failed to build much momentum over the past three months after nearly stalling at the start of the year, reducing an already slim chance that the Bank of England will soon reverse last year's emergency interest rate cut.

"The services aggregate was the main driver to the slower growth in GDP, contributing 0.23 percentage points".

Gross domestic product climbed 0.3% sequentially, slightly faster than the 0.2% expansion seen in the first three months of the year.

Sterling slipped against the U.S. dollar and euro following the release, tracking 1.30 and 1.12 respectively.

"The economy has experienced a notable slowdown in the first half of this year", he added. Today's data suggests possibility that the central bank will revise down its forecasts for the economy next week from the 1.9 percent growth it has now penciled-in.

The fact that growth remained sluggish in the second quarter is another reason to think that policymakers will take a cautious approach at its meeting next week, Capital Economics economist Paul Hollingsworth said.

She added: "However, at the same time, consumer credit levels are clearly causing a headache for (Bank of England governor) Mark Carney".

The IMF now expects UK GDP to grow by 1.7% instead of its previous projection of 2%.

Combine this with the fact that real wages are set to continue to fall this year, it is clear that 2017 will not go down as a good year for the United Kingdom economy.

"The underlying trend is for consumer spending growth to moderate as real incomes are squeezed by higher inflation", said John Hawksworth, chief economist at PwC.

Pound dented following the publication of UK's GDP figures.

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