Having grown 0.7% in the fourth quarter of last year, the Office for National Statistics (ONS) revealed that UK GDP growth was estimated to have slowed to 0.3% in the first quarter of 2017. This was below consensus forecasts which expected the economy to expand 0.4%.
This estimate of UK economic growth represents the weakest expansion posted in the UK since the first quarter of 2016.
Despite the weaker growth, David Page, a senior economist at AXA Investment Managers (AXA IM), said the outcome was fully consistent with its forecast for 2017 growth of 1.7% (consensus 1.8%).
“The slowdown in GDP was dominated by weaker consumer spending, with retail sales contracting by around 1.25% in Q1,” Page said. “However, the scale of contraction in retail activity looks volatile and we suspect a rebound in Q2 is likely to support faster expansion in Q2.”
Having reached a seven-month high against the US dollar this morning, the pound fell slightly on the news, while the FTSE was largely unchanged.
Ben Brettell, a senior economist at Hargreaves Lansdown, said: “2017 looks set to be a year of slower growth, as higher inflation puts the squeeze on consumers’ real incomes ahead of June’s general election and the start of Brexit negotiations. The economy has surprised on the upside since last summer’s referendum, powered by a resilient consumer, but it looks like households are now starting to feel the pinch from the current bout of inflation.
“It’s also worth noting that initial GDP estimates can usually be taken with a pinch of salt, as they are based on less than half of the data which will ultimately be available, and are therefore subject to revision in the coming months.”