LONDON (Reuters) – Britain’s economic system warmed up a bit of within the second quarter from its winter slowdown of early 2018, however there was no signal of an finish to its stuttering efficiency forward of Brexit subsequent yr.
The world’s fifth-biggest economic system relied on the providers trade for development within the second quarter, regardless of indicators that its households had been underneath rising monetary pressure.
By distinction, producers struggled and internet commerce dragged on development as any increase from the pound’s post-Brexit vote fall pale away.
Gross home product expanded zero.four p.c within the April-June interval after a zero.2 p.c rise within the first quarter, as anticipated in a Reuters ballot of economists, the Office for National Statistics mentioned.
In annual phrases, development picked up solely barely to 1.three p.c within the second quarter after a virtually six-year low of 1.2 p.c at the beginning of the yr.
Sterling, shaken over the past week by rising speak of a no-deal Brexit, was little moved by the info which confirmed companies remained reluctant to boost funding.
Net commerce exerted the most important drag on the economic system because the third quarter of 2016.
Britain’s economic system slowed after the choice to go away the European Union and is predicted to proceed to broaden at a weaker tempo than most different developed economies because the March 2019 Brexit date approaches.
(Graphic – UK economic system snapshot: tmsnrt.rs/2byBv8u)
“Overall we judge that the economy’s performance in Q2 was a touch disappointing, bearing in mind the support to growth from a double weather whammy of a recovery from a cold Q1 and a boost from a warm Q2,” Investec chief economist Philip Shaw mentioned.
Still, news that the economic system bought over its winter stoop is prone to reassure Bank of England policymakers who final week raised rates of interest to a brand new post-financial disaster excessive of zero.75 p.c regardless of issues concerning the method of Brexit.
Britain’s government has but to agree a divorce take care of Brussels and has stepped up planning for the potential for leaving the bloc with none formal settlement.
Finance minister Philip Hammond mentioned Brexit uncertainty was having a “depressing effect” on Britain’s economic system however he mentioned development would decide as much as pre-referendum ranges if the EU accepted London’s plan for his or her new relationship.
FACTORIES OFF 2017 PEAK
The ONS mentioned the economic system had been helped within the second quarter by retail gross sales and building recovering from heavy snow earlier within the yr.
“However, manufacturing continued to fall back from its high point at the end of last year and underlying growth remained modest by historical standards,” ONS statistician Rob Kent-Smith mentioned.
In June alone, the economic system grew zero.1 p.c after a zero.three p.c rise in May, weaker than forecasts within the Reuters ballot for a zero.2 p.c growth, the ONS mentioned.
Growth over the second quarter was pushed largely by the service sector, the ONS mentioned.
Quarterly development in family spending quickened barely to zero.three p.c from zero.2 p.c within the first quarter, however stood only one.1 p.c larger than a yr in the past — the weakest annual enhance since early 2012.
Consumers have struggled to deal with weak wage development for a lot of the previous decade and a spike in inflation after the Brexit vote solely added to the issue. More lately, wages have risen extra shortly than inflation however there have been indicators that family funds stay stretched.
Retailers specifically have struggled. On Friday division retailer chain House of Fraser was purchased from its directors by low cost retailer Sports Direct.
The ONS mentioned business funding expanded zero.5 p.c quarter-on-quarter, barely outweighing a zero.four p.c drop within the first quarter. The year-on-year rise of zero.eight p.c in business funding was the weakest because the finish of 2016.
Editing by Catherine Evans and Hugh Lawson