The initial reading of UK first quarter economic activity suggested a sharp decline in the rate of expansion of the economy from the previous quarter. Q4 2016 GDP came in at 0.7% whilst the initial reading for Q1 2017 suggested a slowdown in the rate of expansion to less than half this with an expansion of 0.3%. The quarterly GDP initial estimate is based on a subset of the data for the quarter in question and is subject to two further revisions as more comprehensive data is collected.
The rate of expansion of the UK economy in Q1 has been revised down to 0.2%. This will not be welcome information for the UK Prime Minister as she campaigns (unnecessarily) for re-election in just 13 days’ time.
The downgrade is being ascribed to weaker than estimated performance in the UK economy’s dominant service sector with the Office for National Statistics pointing to a slowdown "in consumer-focused industries, such as retail sales and accommodation" which they attribute to the background of rising prices. The official inflation figure is now 2.7% and is running above wage increases meaning that people are seeing a fall in disposable income.
The service sector expanded at 0.2% in Q1, strikingly down from the Q4 2016 level of 0.8% and lower than the original projection of 0.3%. The service sector is the dominant term in the UK economy, accounting for 80% of economic activity.
Campaigning in the UK general election was suspended for 48 hours in the aftermath of the terrorist attack in Manchester. It was due to resume fully on Friday.