UK economic growth 'slowed to 0.4%' in first quarter, PMI data shows

(c) Sky News 2017: <a href="http://news.sky.com/story/uk-economic-growth-slowed-to-04-in-first-quarter-pmi-data-10825954">UK economic growth 'slowed to 0.4%' in first quarter, PMI data shows</a>
 

The authors of respected economic activity surveys believe UK growth slowed markedly to 0.4% in the first quarter of the year.

The prediction ahead of an official estimate from the Office for National Statistics later this month was made following the publication of the Markit (NasdaqGS: MRKT - news) /CIPS services purchasing managers' index (PMI) for March.

It found that business activity in the services sector, which accounts for almost 80% of UK output, bounced back from a five-month low in February as demand strengthened, particularly from abroad, though mounting costs were likely to have dented investment at home.

The collapse in the value of the pound since the Brexit referendum, while boosting exports, has meant that prices charged by services firms in the UK were rising at levels not seen since the financial crisis, the report said.

The economy has proved more resilient than economists had expected following the EU vote, with UK gross domestic product (GDP) growth rising at 0.7% in the final quarter of 2016.

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However, more recent data has suggested that price rises - a result of imports being more expensive because of sterling weakness - started to take a toll on spending in the first quarter of 2017.

Earlier PMI surveys have found growth in housebuilding - which has propped up the construction sector - is now slowing.

A surge in manufacturing - aided by higher demand abroad for pound-priced goods - was also found to have eased back in the PMI data, which is used by economists to gauge the health of the key sectors of the economy and future investment intentions ahead of the release of official figures.

IHS Markit (Stuttgart: A1139A - news) chief economist Chris Williamson said the acceleration in services activity failed to "change the picture of an economy that slowed in the first quarter".

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He said: "The relative weakness of the PMI survey data compared to that seen at the turn of the year suggests the economy will have grown by 0.4% in the first quarter, markedly lower than the 0.7% expansion seen in the fourth quarter of last year.

"The March uptick in the PMI surveys merely brings the data in line with a neutral policy stance at the Bank of England.

"As such, the data adds to the sense that, with economic and political uncertainty likely to intensify as the Brexit process gets under way, policymakers are likely to continue to stress the need to look through any further upturn in inflation and focus instead on the need to keep policy on hold to support economic growth."

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