The UK economy suffered an even deeper slowdown at the start of the year as the services sector came under pressure and inflation dealt a blow to household spending.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.2 per cent in the first quarter of 2017, revising down the figure from its initial estimate of 0.3 per cent.
Economists had been expecting GDP growth to slow from 0.7 per cent in the fourth quarter of last year, but they had pencilled in growth of 0.3 per cent for the first three months of 2017.
The ONS said: “Consumer-facing industries such as retail and accommodation fell and household spending slowed.
“This was partly due to rising prices. Construction and manufacturing also showed little growth, while business services and finance continued to grow strongly.”
The services sector put downward pressure on GDP after output was revised down to 0.2 per cent from 0.3 per cent for the first quarter.
It means the powerhouse industry, which accounts for 78 per cent of the UK economy, slowed substantially from the 0.8 per cent growth seen between October and December last year.
Brexit vote
Household spending was also dragging on overall growth for the first three months of the year after eking out its lowest quarter-on-quarter growth since 2014 at 0.3 per cent.
Sterling’s slump since the Brexit vote has bumped up the cost of the living as manufacturers and retailers pass down rising import prices to consumers. Inflation hit its highest level in nearly four years last month at 2.7 per cent , as the Brexit-hit pound, electricity price hikes and rising air fares tightened the squeeze on household spending.
The Bank of England said earlier this month that inflation would peak at 3 per cent later this year. Despite the first quarter’s inflation-induced slowdown, business investment grew by 0.6 per cent over the period thanks to a boost from machinery and intellectual property products.
However, net trade shaved 1.4 per cent off the quarterly GDP growth rate due a jump in the number of imports. The statistics agency said manufacturing grew by 0.3 per cent in the first quarter, while total production and construction expanded by 0.1 per cent and 0.2 per cent respectively.
It means GDP grew by 2 per cent in the first quarter of 2017 compared with the first three months of last year, revised down from 2.1 per cent.
