The value of sterling against the dollar has plunged by more than a cent this morning as the UK economy grew by much less than expected in the first quarter of 2018.
Data from the Office of National Statistics published today (27 April) revealed GDP grew by 0.1 per cent in the three months to the end of March, as compared with 0.4 per cent in the final three months of 2017.
The statistics office said that while the inclement weather was a factor, the slower pace of growth could not entirely be attributed to the onslaught of spring snow.
The ONS report said: “The weakness of UK economy in Q1 can’t entirely be blamed on weather:
"While the snow had some impact on the economy, particularly construction and some retail, overall effect was limited with the bad weather actually boosting energy supply and online sales.”
The organisation said a slowdown in manufacturing growth was a key contributor to growth.
The impact of the poor weather can be seen the weakness of growth in the construction sector. Growth in that sector was negative by 3.3 per cent.
This chimes with the fact that many Eurozone countries, notably France, which also released GDP figures this morning, were similarly below expectations.
Ben Brettell, senior economist at Hargreaves Lansdown said the data shows the economy grew at the slowest pace since the final quarter of 2012.
The data showed that GDP per capita was negative 0.1 per cent during the quarter, indicating that the median person in the UK economy generated less wealth during the quarter than in previous quarters.
This matters because if they are generating less on a consistent basis, then they will receive less of the wealth generated in the economy, ie, lower wages, and then consume less, creating a recession.
Sterling’s value fell because the market believes there is less chance interest rates will rise in May.
Nancy Curtin, chief investment officer at Close Brothers said that while some slowdown in economic growth was expected, the scale of the slowdown “will raise eyebrows” among investors.
David.Thorpe@ft.com
