UK Economic Growth Slowest In 6 Years Amid Brexit Chaos
(RTTNews) - Britain's economic growth slowed sharply in the fourth quarter of 2018, and the full year growth was the slowest in six years, as activity was dampened by Brexit worries and global trade tensions.
Gross domestic product grew 0.2 percent from the third quarter, when the economy expanded 0.6 percent, preliminary figures from the Office For National Statistics showed on Monday. Economists had expected the pace of growth to halve to 0.3 percent.
The economy grew 0.4 percent in the second quarter and 0.1 percent in the first three months of 2018.
On a year-on-year basis, GDP rose 1.3 percent in the fourth quarter, which was the weakest pace since the second quarter of 2012. In the third quarter, annual growth was 1.6 percent. Economists had expected growth of 1.4 percent.
"GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining," ONS Head of GDP Rob Kent-Smith said.
"However, services continued to grow with the health sector, management consultants and IT all doing well."
Economic growth in the full year 2018 was 1.4 percent, which was the slowest since 2012, when the economy expanded at the same pace. A growth rate weaker than this was last recorded in 2009, when GDP fell 4.2 percent.
GDP decreased 0.4 percent in the month of December, while economists had expected stagnation.
Construction, production and services output fell in December, the first time that there has been such a broad-based fall in monthly output since September 2012, the ONS said.
British economic activity has been dampened mainly by the lingering chaos surrounding Brexit.
The UK is set to leave the European Union on March 29, but Prime Minister Theresa May is yet to figure out how this is going to happen - whether the country would leave the bloc with some deal on trade and other crucial matters or quit without any arrangements.
Last week, the Bank of England lowered the growth forecast for this year to 1.2 percent, the slowest pace in a decade, from 1.7 percent predicted in November. That was the biggest cut in the projection since the 2016 referendum.
The central bank had warned earlier that a no-deal Brexit would cause a severe recession in the UK, the kind not even seen during the global financial crisis a decade ago.
"With a growing risk that we may not know whether 'no deal' has been averted until much closer to the 29 March deadline, the UK economy faces a challenging few weeks," ING economist James Smith said. "The chances of a rate hike from the Bank of England this year are receding."
In the fourth quarter, private consumption grew 0.4 percent sequentially, which was slightly faster than the 0.3 percent gain economists had forecast.
Government spending rose 1.4 percent, which was also a biggest gain than the 0.5 percent increase economists had predicted.
Gross fixed capital formation shrunk 0.5 percent, which worse than the 0.2 percent decline economists had expected.
Exports grew 0.9 percent and imports rose 1.3 percent. Both were expected to increase 1 percent each.
Business investment decreased 1.4 percent sequentially, which was a more severe fall than the 1 percent decline economists had predicted. Sequentially, business investment decreased for fourth quarter in a row, raising concern among economists.
Separately, the ONS released foreign trade, production and services data for December.
The total trade deficit for December was GBP 3.2 billion, which was slightly bigger than the GBP 3.1 billion consensus forecast. The visible trade deficit was GBP 12.1 billion versus the consensus forecast of GBP 11.95 billion.
In December, industrial production decreased 0.5 percent month-on-month, which was in contrast to expectations for a modest gain of 0.1 percent.
Manufacturing output shrunk 0.7 percent, while it was expected to grow 0.2 percent. Construction output tumbled 2.8 percent month-on-month, defying expectations for a modest 0.1 percent increase.
The index of services decreased 0.2 percent monthly, while it was expected to remain unchanged.