MNI DATA ANALYSIS: UK Economy Barely Grows in Q1>

-UK Q1 GDP +0.1% q/q; +1.2% y/y vs +0.4% q/q, +1.4% y/y in Q4

-UK Feb Index of Services -0.2% m/m, +0.4% 3m/3m 

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - UK growth slowed markedly in the first quarter, 

dampened by a plunge in construction activity, taking per capita gross 

domestic product into negative territory over the opening three months 

of the year. 

     Gross domestic product rose by just 0.1% in the first three months 

of 2018, according to preliminary data released on Friday, well below 

the median MNI forecast of a 0.3% gain, down from the 0.4% pace recorded 

over the final quarter of 2017. 

     That's the slowest pace of growth since the fourth quarter of 2012, 

and took gross domestic product per capital down by 0.1% in the first 

quarter, the first decline since the first quarter of 2016. 

     While the U.K. suffered unusually heavy snowfall in March, National 

Statisticians stressed the "limited impact" of weather conditions on the 

weaker-than-expected data. 

     On an annual basis, GDP rose by 1.2%, below the MNI median of 

1.35%, down from the 1.4% pace of the fourth quarter, and also the 

weakest gain since the second quarter of 2012.  

     The result defied the expectations of the Bank of England's 

Monetary Policy Committee as discussed at the March rate-setting 

meeting. Member agreed that "the latest activity indicators suggest that 

the underlying pace of GDP growth in the first quarter of 2018 remains 

similar to that in the final quarter of 2017." 

     The slowdown in growth raises a dilemma for the MPC, after a number 

of members strongly suggested the possibility of a rate hike at the next 

meeting in May. However Bank of England Governor Mark Carney appeared to 

dampen such speculation last week, referring to "mixed data" in 

describing the state of the economy. 

     Construction comprises just 6.1% of gross domestic product, but a 

3.3% plunge in the first quarter shaved 0.2 percentage points from 

growth. Statisticians estimated a 2.3% decline in construction activity 

between February and March in deriving the first estimate of GDP.  

     The dominant service sector slowed in the first quarter of 2018, 

expanding by 0.3%, down from a 0.4% increase in the previous period, 

accounting for 0.2 percentage points of total growth. Services comprise 

79.3% of total output. 

     However, output of services declined by 0.2% between January and 

February, according to a separate report released on Friday. 

     Over the three months to February, services expanded by 0.4%, down 

from a 0.6% pace in the three months to January. 

     The performance of the service sector draws heavily upon estimated 

data, and the Office for National Statistics has penciled in 0.1% growth 

between February and March. 

     Industrial production expanded by 0.7% in the first quarter, up 

from 0.4% in the final three months of 2017, largely boosted by a 

rebound in oil and gas production in January, with the reopening of the 

North Sea Forties pipeline. Industrial output added 0.1 percentage 

points to total growth. 

     Manufacturing output slowed dramatically after a stretch of 

buoyancy during the second half of last year, contracting by 0.2% in the 

first quarter after a 1.3% gain in the last quarter of 2017. 

     ONS statisticians estimated a 0.1% monthly gain in industrial 

output for March. Production accounts for 14.0% of total output. 

     The preliminary estimate of output relies upon hard data for just 

44% of calculations, with the rest drawn from estimates, according to a 

National Statistics official.  

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,MABDS$]