UK economic growth estimate revised down

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The UK’s economy grew more slowly than first estimated in the first three months of the year, as the key services sector lost momentum.

Economic growth slowed to 0.2% in the quarter, the Office for National Statistics (ONS) said, down from the original estimate of 0.3%.

The ONS said there had been a slowdown “in consumer-focused industries, such as retail sales and accommodation”.

“This was partly due to rising prices,” it added.

In the last quarter of 2016 the UK economy had expanded by 0.7%, but many economists have been expecting it to slow this year as they predict consumers will cut back on spending in the face of accelerating inflation.

The UK’s inflation rate hit 2.7% in April – the highest figure since September 2013.

Investment pick-up

The services sector accounts for almost 80% of the economy, but the ONS now estimates that the sector expanded by just 0.2% in the first quarter of the year.

That is down from the ONS’s initial estimate of 0.3% and a sharp fall from the 0.8% growth recorded in the last quarter of 2016.

The ONS added that the construction and manufacturing sectors showed “little growth”, but said business services and finance “continued to grow strongly”.

There was also good news from business investment, which rose by 0.6% in the quarter after contracting at the end of last year.

However, the net trade position weighed on the economy, following an increase in imports.

The downward revision to the first-quarter’s growth rate came as a surprise, but analysts said there was a good chance the growth rate could recover in the second quarter of the year.

“Looking ahead, the business surveys and April’s strong performance on the High Street suggest that there is a good chance that quarterly GDP growth will rebound in the second quarter,” said Ruth Gregory, UK economist at Capital Economics.

However, other analysts said such a rebound might only be temporary.

“While we anticipate a modest bounce in the second quarter, the bigger picture remains one of 2017 seeing a weaker pace of growth,” said Martin Beck, senior economic adviser to the EY Item Club.

“The economy is struggling to offset the drag from a weaker consumer.”

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