Business

Economic growth remains lacklustre despite January fillip

UK economic growth remained subdued in the quarter to January
UK economic growth remained subdued in the quarter to January UK economic growth remained subdued in the quarter to January

ECONOMIC growth remained subdued in the UK in the quarter to January ahead of Brexit, despite a bigger-than-expected bounceback at the start of the year.

Official figures showed the UK economy grew by 0.5 per cent month on month in January thanks to a recovery across the services, construction and manufacturing sectors.

The monthly rebound reversed a hefty 0.4 per cent drop in gross domestic product (GDP) seen in December.

But it was not enough to boost the overall performance in the three months to January, with growth edging 0.2 per cent higher, according to the Office for National Statistics (ONS).

This was the same as the lacklustre growth seen in the final quarter of 2018.

Rob Kent-Smith, head of GDP at the ONS, said: "Across the latest three months, growth remained weak, with falls in manufacture of metal products, cars and construction repair work all dampening economic growth.

"These were offset by strong performances in wholesale, IT and health services.

"This sluggish growth came despite the economy bouncing back from a weak December."

January's rise in GDP was the biggest monthly increase since 2016 and came after the dominant services sector expanded by 0.3 per cent, while construction surged 2.8 per cent ahead and manufacturing enjoyed a 0.8 per cent rise.

But the three-month data revealed manufacturing contacted by 0.7 per cent, while construction activity fell 0.6 per cent, which was only partially offset by a 0.5 per cent increase in the services sector.

Britain's growth has been slowing markedly since last summer as Brexit uncertainty and an easing in the wider global economy have taken their toll.

GDP growth more than halved in the final three months of the year after a buoyant 0.6 per cent in the third quarter, which was helped by the summer heatwave and World Cup.

The Bank of England has predicted the lowest growth for a decade this year, slashing its forecast to just 1.2 per cent in 2019 - which is also based on a smooth Brexit transition.

Howard Archer, chief economic adviser at the EY Item Club, said: "Despite January's rebound in GDP, the overall impression remains that the economy is struggling in the first quarter of 2019 amid serious business and consumer caution resulting from heightened Brexit uncertainties, while weaker global growth is also impacting."

He is forecasting quarterly GDP growth to remain at a paltry 0.2 per cent, despite stock building by businesses and possibly consumers.

"If the UK does manage to leave the EU with a deal at the end of March, we believe that there are the domestic ingredients for a pick-up in growth," he added.

Official trade figures also out on Tuesday showed the UK's total trade deficit widened to a five-month high of £3.8 billion in January, up from £3.4 billion in December.

Exports rose 2.3 per cent month on month in January, while imports increased a larger 2.8 per cent.

In the three months to January, the total trade deficit widened by £1.3 billion to £10.4 billion as exports fell £1.3 billion and imports increased by £1.1 billion.