The Bank of England left interest rates unchanged at 0.5% on Thursday, citing weaker than anticipated first-quarter growth and declining inflation.
The bank also cut its forecast for 2018 economic growth from 1.8% to 1.4%. However, a rate rise is still expected for August or November this year.
Bank governor Mark Carney said that “any future increases in [interest rates] are likely to be at a gradual pace and to a limited extent”.
The decision to keep rates on hold this month follows official estimates of economic growth of just 0.1% in Q1 - though the bank’s Monetary Policy Committee said it thought this preliminary estimate would be revised up.
Official statistics also showed the UK’s manufacturing and construction sectors both contracted in March, providing more evidence that the economy made a weak start to 2018.
Manufacturing output dropped 0.1%, the second monthly fall in a row, as both domestic and export orders declined, the Office for National Statistics said.
The construction sector contracted at its sharpest rate for more than five years, with output down by 2.3% as poor weather hit an already struggling building industry.
The UK’s trade deficit also narrowed by £700m in the three months to March, though this was due to a fall in imports rather than an increase in exports.
“Despite the narrowing in the UK’s trade deficit in [the first quarter], with the construction sector in recession and manufacturing output slowing, this is further confirmation that the UK’s economic performance in the opening months of 2018 has been underwhelming,” said Suren Thiru, head of economics at the British Chambers of Commerce.
House prices saw their biggest monthly fall since 2010 in April, according to Halifax. The lender said reduced demand was the main factor behind prices declining by an average of 3.1% over the month. Annual growth slowed to 2.2%, down from 2.7% previously.
Research by the Royal Institute of Chartered Surveyors also reported falling prices, with London particularly weak.
Retail sales “fell off a cliff” in April thanks to Easter being early and unpredictable weather, according to the British Retail Consortium.
Like-for-like retail sales were down 4.2% year on year in April, the largest fall since 2005.
Paul Martin, head of retail for KPMG said: “April’s figures show retail sales growth falling off a cliff…[though] we must exercise caution and remember that the timing of Easter makes meaningful comparisons difficult.”
Samuel Tombs, chief UK economist for Pantheon Macroeconomics said the BRC survey added to evidence that consumers had tightened their purse strings: “The widely anticipated revival in growth in consumers’ spending is not emerging this year. While wages are no longer falling in real terms, households’ incomes were hit in April by another round of austerity measures and a rise in minimum pension contributions.”
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