British GDP growth accelerated slightly in the second quarter of the year, but economists are hardly ecstatic.
Growth of 0.3 per cent in the second quarter is still less than half of the rate in the final quarter of 2016, although recent pick-up in the services sector might provide some succour for the economy.
Here’s how economists reacted.
Howard Archer, chief economic advisor to the EY Item Club, said: “The second half of 2017 looks likely to remain very hard work for the UK economy, resulting in ongoing limited growth.
“Consumer spending is likely to be impacted through the second half of the year by an ongoing appreciable squeeze on purchasing power (indeed real incomes growth is likely to remain negative for some months to come despite June’s dip in inflation).”
The Brexit effect?
Kallum Pickering, senior UK economist at Berenberg bank, said: “Although real GDP growth accelerated a little to 0.3 per cent quarter-on-quarter in the second quarter, in line with estimates, in the first half of 2017 the UK economy grew by just one per cent annualised – the slowest annualised pace in four years.
“Whereas growth has accelerated significantly so far this year in continental Europe and many emerging markets, the UK is missing out. While the downside risks from the Brexit vote have not yet played out in a major way, the uncertainty stemming from Brexit is leading to caution in all areas of spending and policy that have long-term implications.”
Read more: IMF downgrades UK growth forecast
Head-scratching on Threadneedle Street
David Page, senior economist at AXA Investment Managers, said: “Today’s release undershot the Bank of England’s expectation of GDP growth which was for 0.4 per cent in the second quarter. This is the second successive undershoot of the BoE’s estimates.
“Our own view is that this more subdued pace of activity is likely to persist contrary to the BoE outlook which considers faster growth in the second half of 2017 and a further acceleration in 2018. We think this is likely to see the BoE leave bank rate unchanged not only in 2017, but also throughout 2018.”
Tread carefully in analysing consumer spending
Sam Hill, senior UK economist at Royal Bank of Canada, said: “For some, the rebound in the retailing and catering/hotels sub-sectors of the services economy will serve as evidence that the consumer-led slowdown may not be too severe.
“However, for retail and wholesale, the level of output is only the same now as it was at the end of 2016, despite the second-quarter recovery, so there is clearly some retrenchment in the consumer sector.”
Scott Corfe, Social Market Foundation chief economist, said: “The biggest worry about these GDP figures is that underlying growth is unsustainable and unbalanced.
“In particular, it's concerning that retail sales were the largest contributor to growth, and that so much of this has been driving growth in unsecured debt. This cannot go on indefinitely.”