2017 looks set to be a year of slower growth, as higher inflation puts the squeeze on consumers’ real incomes ahead of June’s general election and the start of Brexit negotiations.
The economy has surprised on the upside since last summer’s referendum, powered by a resilient consumer, but it looks like households are now starting to feel the pinch from the current bout of inflation.
Today’s preliminary estimate of first-quarter GDP growth came in at just 0.3%, down from 0.7% in the final quarter of 2016 and undershooting economists’ forecasts for 0.4% growth.
Ben Brettell, Senior Economist, Hargreaves Lansdown said: “The slowdown can be largely attributed to the dominant services sector, which grew 0.3% compared with 0.8% in the previous quarter.
“The production and construction sectors also posted modest figures of 0.3% and 0.2% respectively. Manufacturing growth was also disappointing given the sector is a key beneficiary of a weaker pound.”
Having reached a seven-month high against the US dollar this morning, the pound fell slightly on the news, while the FTSE was largely unchanged.
The GDP numbers follow March’s disappointing retail sales figures, which suffered their biggest quarterly drop since 2010.