Thursday, September 6, 2018
Business

UK economic growth revised downwards

The UK economy expanded by less than previously thought in the last three months of 2017, official figures say.

GDP grew by 0.4% in the October-to-December period, the Office for National Statistics (ONS) said, down from the initial estimate of 0.5%.

The revision was due to slower growth in production industries, the ONS said.

In 2017 as a whole, the economy grew by 1.7%, also slightly lower than previously thought and the weakest since 2012.

The ONS had previously estimated that the economy grew by 1.8% last year.

The statistics body said that household spending grew by 1.8% last year, also the slowest annual rate since 2012. It said the slowdown was partly because of shoppers facing higher prices in stores.

"A number of very small revisions to mining, energy generation and service were enough to see a slight downward revision to quarterly growth overall," said ONS statistician Darren Morgan.

One drag on the UK economy at the end of last year was the shutdown of the Forties pipeline system for a large part of December 2017.

The closure of one of the UK's most important oil pipelines cost about £20m a day in lost activity, according to Oil and Gas UK.

Chris Williamson, chief economist at IHS Markit, said that some areas of the UK economy looked "worryingly weak" in the final months of last year.

The data suggested the construction industry is in recession, business investment was stagnant and household spending was seeing only "modest" growth, he said.

Households have been squeezed by rising inflation coinciding with weak wage growth.

John Hawksworth, chief economist at PwC, said that would hold back growth this year to 1.5%.

"This would not be disastrous by any means, but would place us towards the bottom of the G7 growth league table together with Italy and Japan, rather than at the top with Germany and the US.

The UK's year-on-year growth rate in the fourth quarter of 2017 was 1.4%, making it the slowest growing of the world's wealthy nations (comparable figures for Canada are not yet available). The UK is also growing more slowly than the eurozone.

The Bank of England is a bit more optimistic about growth prospects.

Last month, it raised its growth forecast for the UK economy to 1.8% this year, from its previous forecast of 1.6% made in November.

At the time, the Bank indicated that the pace of interest rate increases in the UK could accelerate if the economy remained on its current track.

Encouraging signs

One nagging problem for the UK has been a lack of productivity growth since the financial crisis of 2007.

But on Tuesday, official data showed signs of improvement.

Output per hour rose 0.8% in the three months to December, the Office for National Statistics said. It follows growth of 0.9% in the previous period.

That was the the strongest two-quarter period of productivity growth since the recession of 2008.

There was also a better-than-expected rise in wages. Excluding bonuses, earnings rose by 2.5% year-on-year.

Unemployment edged higher at the end of last year, but still remains low at 4.4%.

Original Article

BBC

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