Growth slows in first quarter of 2017

28 Apr 17

The UK economy grew just 0.3% in the first quarter of this year, the slowest rate for a year, according to the Office for National Statistics.

The ONS said that the slowdown in GDP growth between January and March was due mainly to the service sector, which sank to 0.3% growth against 0.8% at the end of 2016.

Today’s quarterly figures are down compared to the last quarter of 2016 where GDP increased by 0.6%.

Commenting on the figures, Matt Whittaker, chief economist at the Resolution Foundation think-tank, said: “The UK economy has been far too reliant on consumer spending in recent years.

“With income growth slowing from the middle of last year, households increasingly turned to borrowing as a means of sustaining their spending. That position was never sustainable and the early data for 2017 suggests that households have pulled back on spending with a direct feed through to slower growth.”

Whittaker said consumers were “back in the grip of a fresh pay squeeze” and today’s figures demonstrate the need to rebalance the UK economy and boost weak productivity growth.

He said nine years on from the financial crisis, GDP per capita is just 1.7% above pre-crisis levels.

In contrast, GDP per capita was 16.3% above pre-crisis levels at the same point after the 90s recession, and 24.5% higher following the 80s recession. 

The figures reveal in the last quarter there were falls retail sales and accommodation; this was due in part to prices increasing more than spending.

Production, construction and agriculture grew by 0.3%, 0.2% and 0.3% respectively in the first three months of this year while GDP per head was estimated to have increased by 0.1%.

Labour’s shadow chancellor John McDonnell said today’s growth figures were half of what was expected, adding that the Conservatives had “undermined” the economy and people’s living standards.

For the Liberal Democrats, Susan Kramer said the Brexit effect was taking hold.
"But the bad news will only get worse if the Conservatives are allowed to pursue their hard Brexit agenda and put our economy and jobs at risk,” she added.

Chancellor Philip Hammond said the economy was in good shape despite the slowdown. He told Sky News employment was at record highs and “set to go higher still”, adding “the British economy is resilient”. 

However, today’s ONS figures come as the Institute for Fiscal Studies released a report into the UK’s Labour market, which noted employment rises had levelled off and was not expected to rise further.

Jonathan Cribb, a senior research economist at the IFS, said it would be increasingly difficult to improve the employment rate as unemployment, which is now below 5%, was lower than before the recession.

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