“Notable slowdown” in UK economy as GDP growth remains weak
The latest growth figures show the UK economy is losing momentum with consumer spending still driving growth. This comes just as the Bank of England have issued a warning about “complacency” over rising consumer debt.
Figures released today estimate GDP growth in the second quarter of this year at 0.3%. This is a mild improvement on the previous quarter, which showed the economy grew by only 0.2%. However, GDP per head growth was only at 0.1%. There is also a notable difference in growth when you compare the second quarter of 2017 to the same period last year – growth in the second quarter of 2016 was 0.6%.
Growth in the services sector, which was 0.5% in the second quarter, was the main driver for the increase. However, the figures for production, manufacturing and construction all showed negative growth.
The release from the Office for National Statistics (ONS) also put growth at 1.7% when compared to last year. Recently, the International Monetary Fund (IMF) downgraded its growth forecast for the UK in 2017 to 1.7% from an earlier estimate of 2%.
In commentary about the release, ONS’ Head of National Accounts Darren Morgan said “the economy has experienced a notable slowdown in the first half of this year”. Morgan added “while services such as retail, and film production and distribution showed some improvement in the second quarter, a weaker performance from construction and manufacturing pulled down overall growth”.
The figures also confirm the importance of consumer spending on the economy with retail sales and the film industry as key drivers in growth. However, with workers continuing to experience weaker pay growth and inflation expected to remain high for the time being, things are unlikely to improve anytime soon. This also comes as the Bank of England warns of “complacency” over rising consumer debt. As the Guardian reports, consumers have been willing to take on more debt to spend, which in turn has helped boost the economy – particularly in the aftermath of the vote to leave.