UK economic growth fell to a five-year low in the first quarter of 2018, reducing the possibility of an interest rate rise in May.
The Office for National Statistics’ estimate of growth of just 0.1% between January and March was much lower than expected and the slowest rate of economic expansion since the end of 2012.
“The downside surprise in Q1’s [growth] figures is probably the final nail in the coffin for the chance of an interest rate hike in May,” said Paul Hollingsworth, senior UK economist at Capital Economics.
Economists had been expecting growth to slow to 0.3%, from 0.4% in the final quarter of 2017, due to poor weather earlier this spring.
Rob Kent-Smith of the ONS said: “Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly.”
“While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales.”
UK consumer confidence declined in April, marking the 28th consecutive month in negative territory despite an improved outlook for wage growth and employment, according to a survey.
Researcher GfK’s consumer confidence index slipped two points to minus 9 in April, with consumers becoming more pessimistic about their personal finances.
Joe Staton, GfK client strategy director, said: “Worryingly, there is a steep decline this month in the numbers concerning our personal financial situation – for both the past 12 months and the year ahead. This is the measure relating to security in our day-to-day finances and propensity to shop, spend and plan for their future. But there’s little evidence of optimism in that respect - consumer confidence is stuck in the doldrums.”
House price growth edged higher in April to an annual rate of 2.6%, according to the latest Nationwide House Price Index. In March, the building society put the annual growth rate at 2.1%.
Robert Gardner, Nationwide’s chief economist, said: “Surveyors continue to report subdued levels of new buyer inquiries and recent months have also seen a softening in new instructions.”
“Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year.”
A sharp drop in mortgage lending last month was reported by UK Finance, the banking industry group. Gross mortgage lending by high street banks was £20.5bn in March, 2.3% lower than the same month last year, with the total number of mortgage approvals for new house purchases down 21 per cent to 38,710.
The declines follow the Bank of England’s November interest rate increase and official data showing the first annual fall in London house prices since 2009.
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