UK GDP data points to weak economic growth during H1 2017
Chris Williamson, chief business economist at IHS Markit, has commented on today’s UK GDP data released by the Office for National Statistics.
He said: “Fresh economic growth estimates from the ONS confirm that the first six months of 2017 saw the weakest start to the year since 2012. The new GDP estimates confirmed that the economy grew by a modest 0.3% in the second quarter after a similar expansion during the first three months of the year. Compared to a year ago, the economy was just 1.5% larger in the second quarter, its worst annual growth rate since 2013.
“The services sector was the only part of the economy to expand in the second quarter, according to the official data. It grew by 0.3% but industrial production fell 0.3%, construction sank 0.5% and agriculture saw a 0.1% dip in output. Worryingly, separate monthly data on the services economy showed output dropping by 0.2% in July, adding to expectations that the sluggish pace of economic growth expansion looks to have persisted into the third quarter.
“PMI survey data for July and August points to GDP continuing to rise at a quarterly rate of 0.3%. While there are signs that manufacturers, and exporters in particular, are benefitting from the weakened pound and surging economic growth in the eurozone, service providers and construction firms appear to be struggling in the face of squeezed households and a reluctance among companies to invest in fixed assets such as industrial space, shops and offices.
“The official data showed household spending growth slowing to just 0.2% in the second quarter, its smallest increase since late 2014, and was lower than previously thought in the second half of last year.
“There was better-than-expected news on exports, with trade providing a significant boost to the economy. Exports grew by 1.7% in Q2 while imports were up just 0.2%. Business investment was also revised higher for the second quarter, but the data is volatile and difficult to put too much reliance on.
“From a recent historical perspective, since the Bank of England’s independence, it would be unprecedented for the central bank to tighten policy with the data pointing to such anaemic economic growth. However, policymakers continue to fuel expectations that interest rates will rise soon in response to higher-than-expected inflation.”