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UK Q1 GDP - Analysts react

By Alexander Bueso

Date: Friday 28 Apr 2017

UK Q1 GDP - Analysts react

(ShareCast News) - "Within the details of the latest GDP release, sectors with exposure to household spending had the biggest negative impact on growth. For example, the distribution, hotels and restaurants sector saw a contraction of 0.5% of GDP, which was the first fall for the sector since the end of 2012. The transport, communication and storage sector also saw its first contraction since 2013. Looking ahead, unless households manage to achieve higher pay growth, we are likely to see the cost of living squeeze continue into the second quarter. This makes it less likely we will see a rebound in the economy until the end of the year. Could this impact the general election? Probably not. The Conservative Party has a commanding lead in the opinion polls, which is unlikely to be significantly affected by such figures." - Azad Zangana, Senior European economist Schroders
"Across the sectors, the weakness was broad-based. The services sector recorded its softest outturn for two years, as high inflation squeezed consumer-facing sub-sectors. And hopes that the weaker pound would stimulate industrial production were disappointed, after the data at the turn of the year had initially shown some promise. Q1 growth was just half the pace that the Bank of England expected, reinforcing the likelihood of a lengthy period of monetary policy inaction. The GDP data also contained some important pointers for Q2. The March estimates were lower than the Q1 average for production and construction, and only marginally higher for services, indicating that the economy carried little momentum into Q2." - Martin Beck, senior economic advisor to the EY ITEM Club

"On the face of it, Q1's weak expansion makes our forecast for GDP growth of 2.0% for 2017 harder to achieve. But forward-looking indicators of the business surveys suggest that a decent amount of momentum has carried through into Q2 and this morning's resilient consumer confidence figures support our view that spending growth will moderate, rather than collapse. So although there are many challenges ahead - not least further rises in inflation this year - we still think that quarterly growth will remain between 0.3% and 0.5% this year, rather than slow further." Ruth Gregory, UK economist Capital Economics

"Today's first reading of the quarter's GDP confirms that the UK economy is decelerating with some indications that consumer-exposed sectors are feeling the strain of a weaker consumer spending backdrop with the distribution, hotel and restaurants sub-sectors having a negative print on the quarter. Looking forward, a tepid consumer backdrop due to a weak wage growth profile and higher inflation is likely to put further pressure on consumer focused parts of the economy." - Shilen Shah, Bond Strategist at Investec Wealth & Investment

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