The Office for National Statistics (ONS) reported that between January and March 2016 Gross Domestic Product (GDP) grew by 0.4% in-line with economists’ expectations, down from 0.6% in Q4 2015. This marks the 13th consecutive quarter of positive growth for the UK.
The ONS report that this slowing of economic growth in Q1, was partly due to a sharp fall in construction output, falling 0.9% during the first three months of 2016. Industrial output also dragged, falling 0.4% during the period, as did agriculture by 0.1%. The ONS said there was no evidence to substantiate a ‘Brexit effect ‘on GDP. The government’s decision to hold the EU referendum was not taken until late February. Business groups cite the impact of weaker global trade and New Year financial market turbulence as more likely explanations for the tail off in growth.
The service sector, the largest part of the economy which accounts for more than three quarters of GDP, continues to perform well, growing 0.6% in Q1, compensating for falls in output in the other three parts of the economy. Joe Grice, Chief Economist at the ONS, commented, “Today’s figures suggest growth has slowed as compared with the pace up to the middle of last year. Services continue to underpin the economy but other sectors have shown falling output this quarter.”
Ruth Miller, economist at Capital Economics, said of the slowdown in growth, “Many of the factors likely to blame for the first quarter’s weakness should prove short-lived. We would not be surprised if growth were to subsequently accelerate in the second half of the year, putting the economy back on track.”
The IMF recently downgraded its global growth forecast and unlike the ONS, refer to Brexit ambiguity as a contributing factor.
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