UK Economic Growth Data for Q1 2017 Disappoints as Hotels and Restaurants see Slower Trade

The UK economy grew by 0.3% in the first quarter of 2017 the ONS has reported.

Economists had forecast growth to come in at 0.4% on a quarterly basis and 2.2% on an annualised basis.

The annualised figure now reads at 2.1%.

The economy surprised everyone with 0.7% growth in the final quarter of 2016 so today’s data represents a noted slowdown.

The ONS says the services sector - which accounts for in excess of 80% of UK economic output - grew by 0.3% in Quarter 1 2017, compared with growth of 0.8% in Quarter 4 (Oct to Dec) 2016.

Within the services aggregate, two of the four main sectors decreased in Quarter 1 2017.

The ONS reports the main contributor to the slowdown in services was the distribution, hotels and restaurants sector, which decreased by 0.5%, contributing negative 0.07 percentage points to quarter-on-quarter GDP growth.

The Pound is stable following the release confirming markets had largely been pricing in a slowing down in activity.

The Pound's lack of movement on the release also confirms our view that issues other than economic data is driving the currency at present, these include global investor sentiment, technical considerations and politics.

The most recent data confirms a trend of slowing economic growth amidst tighter conditions for UK consumers which are traditionally seen as the engine of the UK economy.

Inflation has been rising since June 2016 following the Pound’s fall on the result of the EU referendum. This has in turn pushed up the cost of imports and therefore prices.

However, leading survey data suggests that the second quarter of 2017 has gotten off to a decent start with the Lloyds Business Barometer showing UK businesses are the most confident they have been since 2014.

Other data suggests that UK consumer spending might also be on the up which is important for overall economic growth if we consider the role the consumer plays in the economy.