May rate rise on ice as GDP data 'worse than feared'

Chancellor Philip Hammond blamed the gloomy figures on the snowy weather which hit Britain in the first three months of the year

ONS spokesman Rob Kent-Smith said: "Our initial estimate shows the United Kingdom economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly".

Analysis from economists at PwC earlier this month said that GDP growth could fall as low as 0.2 per cent for the first quarter, down from 0.4 per cent at the end of a year ago.

It was worse than the slowdown to 0.3% predicted by economists, and represents the weakest quarterly growth since the end of 2012.

Britain's economy suffered a sharp slowdown in the first quarter with the weakest growth rate since 2012, official data showed Friday in a gloomy sign one year before Brexit.

"Our initial estimate shows the United Kingdom economy growing at its slowest pace in more than five years with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly", Rob Kent-Smith, the ONS' head of national accounts said in a statement.

Despite the slower growth than expected, the ONS did not put the blame on the big snow troubles during the quarter.

Manufacturing growth slowed to 0.2%, but this was partially offset by a rise in energy production due to colder weather.

In the final three months of 2017, Britain recorded the slowest year-on-year growth of any major advanced economy.

Chancellor Philip Hammond said the latest data "reflects some impact from the exceptional weather that we experienced last month, but our economy is strong and we have made significant progress".

As usual, services, the dominant sector of the United Kingdom economy, accounted for the majority of growth over the data period.

However, some BoE policymakers have said early estimates of first-quarter GDP are often revised up - on average, by 0.3 percentage points - particularly at times of harsh weather.

Another report from ONS showed that in the three months to February, services output increased 0.4% compared with the three months ending November 2017.

The GDP data was "worse than feared", according to Ben Brettell, senior economist at Hargreaves Lansdown.

Britain's preliminary GDP data - which only has 40 percent of the figures used to calculate the final estimate - precedes most other European numbers.

"As recently as last week markets were pricing in a near 90% chance that the Bank of England would raise rates next month... today the market's saying there's just a 25% chance that rates will move in May".

Nomura economist George Buckley said he expected the pound to fall further in the short term but that it might recover if business surveys for April "show signs of bouncing back" and the government clarifies its position on agreeing a post-Brexit trading relationship with the EU.

Samuel Tombs of Pantheon Macroeconomics added that the "chance of a May rate hike is now close to zero".

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