The UK economy slowed in the last quarter of 2018, the weakest since 2012. UK gross domestic product grew just 0.2% in Q4 2018. Here is key commentary:
Ben Brettell, Senior Economist, Hargreaves Lansdown:
“The UK economy slowed to 0.2% in the final quarter of 2019, a significant deceleration from 0.6% the previous quarter. Sterling dropped slightly on the news, losing around a third of a cent against the dollar.
“The slowdown had been widely expected, and the magnitude was in line with economists’ forecasts. But the economy actually contracted by 0.4% in December, against expectations of little to no growth. The services sector, so long the mainstay of the UK economy, grew 0.4% in the quarter, providing almost all the growth. By contrast manufacturing output fell 0.9%. But even the services sector fell in December, though the monthly data is notoriously volatile and it’s usually unwise to read too much into one month’s figures.
“There’s little doubt Brexit uncertainty is responsible for the disappointing numbers, though concerns over global trade will also have played a part. Business investment – the most Brexit-sensitive element of GDP – dropped 3.7% Q4 against a year earlier, the biggest fall since early 2010.
“Last week the Bank of England cut its growth forecasts to 1.2% this year (from 1.7%) and to 1.5% next year (1.7%), and put the odds of the UK slipping into recession by the summer at one in four. Markets now price in just a 35% chance of an interest rate rise by the end of the year, despite a tight labour market and strong wage growth.”
Helal Miah, investment research analyst at The Share Centre:
“The Brexit impasse is now really showing through onto UK economic activity levels, Q4 2018 GDP preliminary figures this morning has not made pleasant reading. We were already anticipating a halving of the growth rate from Q3 of 0.6%, but the actual Q4 growth rate has come out at just 0.2%, while the year on year figure also slowed down to 1.3% from the anticipated 1.3%, the lowest since 2012.
“The GDP figures were dragged lower by the lower manufacturing of cars, steel products and slowing construction sector activity, some of which economists say have felt the direct impact of lower investment spending and businesses taking a “wait and see” approach before making any major investment commitments. This is much more telling in the GDP figures for December where activity fell by 0.4%. The release of December’s Industrial Production and Manufacturing Production numbers, which were released at the same time reflect this, they were both down 0.5% and 0.7% respectively. However, the UK’s most important services sector bucked the trend as the health, IT and management consultancy sectors continued to do well.
“The UK economy is clearly being hampered by Brexit uncertainty, although some Brexiteers may point to slowing activity in our major trading partners as the explanatory factor. However, we feel that assurances over the political environment is needed sooner rather than later for businesses to release pent up investment funds, but the next few weeks/months will probably continue to see the malaise lead to reduced economic activity.”