The UK is officially the slowest growing economy in the G7 and EU so far this year with GDP growth for Q2 confirmed at 0.3 per cent in the second estimate, according to the ONS.
When the first estimate was released a month ago, the figure of 0.3 per cent growth was described as “muddling through”.
The UK comes in behind Italy as the worst performing G7 economy for the year to date, with Japan and Germany leading GDP growth for the first half. Within the EU the UK was the joint slowest growing economy along with Finland.
Economics spokesman for The Share Centre Michael Baxter says household spending was subdued, business investment was flat and trade had a neutral impact in the Q2 figures.
“The main reason for the slow growth rate relates to the falls in the pound post Brexit, which has led to falls in real wages. Bear in mind that the pound has fallen again since then, following the June election, but the effect of this on inflation and real wages is not likely to be felt until next year.
“The UK needs trade-led growth, but at least there is some hope of this happening, the manufacturing purchasing manager’s survey out at the beginning of August pointed to one of the sharpest rises in export sales in the history of the survey. That provides the best hope for the UK.”
Spanish GDP growth, which was also confirmed today, came in three times higher than the UK at 0.9 per cent in the second quarter.
The UK delivered GDP growth of 0.2 per cent in Q1 and was the worst performing economy in the EU for the quarter.
Retail sales disappoint
Meanwhile, retail sales have disappointed in August, according to the latest quarterly CBI Distributive Trades Survey.
The volume of sales fell at the fastest pace since July last year, the month after the UK’s vote to leave the European Union.
CBI head of economic intelligence Anna Leach says firms do expect sales growth to recover despite the pressure on household budgets.
“Despite the warmer weather at the start of the month, retail sales have cooled as higher inflation continues to squeeze consumers’ pockets,” Leach says. “Meanwhile, deteriorating sentiment regarding the business situation has combined with falling headcount among retailers.”
Specialist food & drink stores reported another month of significantly falling sales, but footwear and leather performed well and grocers saw stable sales on the year. Internet sales growth also slowed, but is expected to pick up again next month.
Employment declined in the retail sector in the year to August, at the fastest pace since August 2009, with a similar reduction in headcount expected next month.
However, investment intentions for the year ahead were mildly positive following two quarters of contraction.