UK GDP growth “slowed to a crawl” in Q1 in marked contrast to the previous quarter as well as economic data coming out of the eurozone; however, there are some bright spots in the outlook ahead.
The ONS has revised GDP growth down to 0.2 per cent in its second estimate, compared to 0.3 per cent in its preliminary estimate in April.
The Share Centre says the UK “slowed to a crawl” with economics commentator Michael Baxter attributing the slowdown to Brexit-related falls in sterling and rising input prices worldwide hitting the cost of living.
“Retail and accommodation took a particularly large knock, but it was a bad quarter for manufacturing and construction too.”
In contrast, Baxter points out the eurozone grew 0.5 per cent in Q1.
“As Mark Twain might have said if he were alive today, ‘reports of the death of the euro economy have been greatly exaggerated’.”
However, Baxter says the UK can find some optimism in PMIs pointing to a pick-up in April and the retail sector showing some improvement too, although it is yet to be determined how much of this is due to unseasonably good weather in April and the timing of Easter.
Net trade was also a disappointment, says Schroders senior European economist Azad Zangana, with the volume of exports falling 1.6 per cent, while imports jumped 2.7 per cent compared to a 1 per cent fall previously.
“There was some good news in the figures. Business investment was higher than expected, while government spending also picked up by more than expected.
“However, it is worth mentioning that had inventories not picked up through the quarter, the economy would have stalled.”
Zangana says the weak set of figures are made worse because inflation is still rising “and this period of weakness could persist for some time.”
However, Adrian Lowcock, investment director at Architas, argues inflation has neared its peak and will ease back arguing investors shouldn’t read too much into the GDP figures.
“In the meantime the UK economy is still growing and UK equities remain attractive as the weaker pound means they are effectively on a discount to international investors.”