UK GDP Growth Slows In Q1

The UK economy expanded at a slower pace in the first quarter on weaker spending amid the rising cost of living, data released by the Office for National Statistics showed on Thursday.

Gross domestic product advanced 0.8 percent sequentially, slower than the 1.3 percent increase in the fourth quarter and the economists’ forecast of +1.0 percent.

On the expenditure-side, household spending gained only 0.6 percent. At the same time, government consumption dropped 1.7 percent due to large falls in health expenditure.

The trade deficit for goods and services widened to a record 5.3 percent of nominal GDP in the first quarter, largely reflecting a sharp increase in goods imports.

Gross fixed capital formation moved up 5.4 percent in the first quarter. This reflected an increase in government investment, particularly in other buildings and structures. Business investment decreased 0.5 percent.

In March, GDP slid 0.1 percent after no growth in February. The main contributor to the decline was the 0.2 percent fall in services output.

Production was also down in March, by 0.2 percent. Within production, manufacturing output decreased 0.2 percent. These falls were partially offset by construction, which grew 1.7 percent.

Nonetheless, monthly GDP was now 1.2 percent above its pre-coronavirus pandemic level.

“The economy barely kept its head above the water during a volatile start to the year, but times look set to get that bit tougher,” Rain Newton-Smith, CBI chief economist, said.

The risk of recession has just risen, although strong price pressures will probably mean the BoE will raise interest rates further, Paul Dales, an economist at Capital Economics, said.

According to the National Institute of Economic and Social Research, the economy will expand 3.5 percent growth for 2022 and CPI inflation will reach 8.3 percent in the fourth quarter.

Another report from the ONS showed that the trade in goods deficit, excluding precious metals, widened by GBP 19.6 billion to GBP 62.2 billion in the first quarter, as imports of goods grew 15.2 percent, while exports dropped 0.3 percent.

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