GDP Figures Reveal Economic Growth Weakest for More Than Two Years

Western Mail (Cardiff, Wales), April 29, 2015 | Go to article overview

GDP Figures Reveal Economic Growth Weakest for More Than Two Years


Byline: Sion Barry Business Editor sion.barry@walesonline.co.uk

BRITAIN experienced a sharp slowdown at the start of the year as growth slipped to a worse-than-expected 0.3%, official figures showed yesterday.

The pace of gross domestic product (GDP) growth in the first quarter was half the 0.6% rate seen in the final quarter of 2014, a pre-election setback for Coalition parties.

It was the weakest quarterly growth since the end of 2012. The data comes just nine days before the General Election as politicians vie to demonstrate their competence in running the economy.

The preliminary estimate published by the Office for National Statistics (ONS) showed the dominant services sector grew at its slowest pace in almost two years.

Meanwhile, the construction sector shrank for the second quarter in a row - the first time this has happened since 2012.

Industrial production also shrank slightly, squeezed by a decline in North Sea output amid lower oil and gas prices, though within production manufacturing edged up.

ONS chief economist Joe Grice said: "The economy expanded a little more slowly in the first quarter of 2015 than we've seen in the past two years and that's largely due to the services sector, where growth has eased to 0.5%.

"In addition, there has been a further fall in construction output that itself takes around 0.1% off the GDP growth rate. But, as always, we warn against reading too much into one quarter's figures."

The disappointing GDP figure is likely to cement expectations that interest rates will not rise until next year, amid zero inflation.

It comes after the economy grew by 2.8% in 2014, its fastest pace since 2006 and the strongest rate among G7 advanced economies.

The ONS figures showed the main factor in the slowdown of the key services sector was business services and finance, which edged up only slightly after a strong end to 2014.

The construction sector shrank by 1.6% in the first quarter after a 2.2% fall in the previous three months.

Industrial production shrank by 0.1% but within this manufacturing was up by 0.1%.

The 2008/9 recession saw GDP shrink by 6% but it is now 4% above its pre-downturn level at the start of 2008.

However not all parts of the economy have recovered, with services 8.5% ahead but production still 10.4% behind where it was seven years ago - and, within this, manufacturing down 4.8%.

The construction sector is 8.5% off its level at the start of 2008.

GDP has grown by 8.4% since the second quarter of 2010 when the Coalition came to power.

Economists had forecast the figures to show a slowdown in the pace of quarterly growth but the 0.3% figure was below the consensus of 0.5%.

However there are also expectations that growth will pick up later this year, helped by low inflation boosting consumer spending.

Vicky Redwood, chief UK economist at Capital Economics, said: "With the election just days away, the news that the UK's economic recovery slowed sharply in the first quarter clearly won't help the Coalition parties, but this slowdown should just be temporary. …

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