InvestmentsApr 27 2016

GDP growth drops to 0.4% in Q1

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GDP growth drops to 0.4% in Q1

UK gross domestic product (GDP) increased by 0.4 per cent in Q1 2016 which is in line with consensus expectations but a fall of 20 basis points from the previous quarter.

Initial estimates from the Office for National Statistics (ONS) said the 0.4 per cent increase was due entirely to services sector growth.

Estimates showed a 0.6 per cent increase in the services sector compensated for 0.9 per cent and 0.4 per cent declines in construction and production, respectively.

The ONS said GDP at the end of the first quarter was 2.1 per cent higher than the same stage in 2015.

Capital Economics UK economist Ruth Miller said the slowdown in economic growth seen in the first quarter should be short term. She said uncertainty surrounding the UK’s referendum on European Union membership was taking its toll.

Ms Miller added: “There is still a risk Brexit jitters will further sap the recovery of [UK’s GDP growth] momentum in Q2. But even if growth did continue to slow, if the UK voted to stay in the EU, we would probably just see a bounce-back in Q3.

“Meanwhile, the start of the year saw turbulence in global financial markets and concerns about the global recovery, which have since abated. So we would not be surprised if growth were to subsequently accelerate in the second half of the year, putting the economy back on track.”