Growth to slip after record winter freeze

Julian Harris
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THE coldest winter in 100 years may have contributed to a slowdown in economic growth in the three months to December, economists said ahead of official GDP figures released tomorrow.

Experts have forecast an average 0.4 per cent GDP growth for the quarter, down from 0.7 per cent in the previous quarter.

Heavy winter snow caused shoppers to stay at home, hurting retailers in the run up to the busy Christmas period.

December’s retail sales figures, published on Friday, showed sales volumes frozen at December 2009’s level as people bought less food and fuel.

The weather also affected supply chains, and kept staff away from the workplace.

Some forecasters expect growth to slump to as low as 0.2 per cent, after disappointing results for the service sector – the largest sector in the UK, which contributes more than 70 per cent to GDP.

A purchasing managers’ survey of the service sector contracted in December, reinforcing expectations that it will drag overall economic performance lower.

Others expect more: the British Chambers of Commerce has forecast 0.6 per cent growth, while think tank the National Institute of Economic and Social Research said output grew 0.5 per cent in the quarter.

A resurgence in UK manufacturing, led by a weaker pound and strengthening export orders from emerging markets, is not expected to stave off the slowdown.

Keith Bowman of Hargreaves Lansdowne said industry growth would be “counterbalanced by consumer hesitancy ahead of expected government spending cuts, which commence in earnest during 2011.”

The UK grew 0.7 per cent in the third quarter of last year and 1.1 per cent in the second quarter, but the contribution of a boost in construction is not expected to continue into the fourth quarter, partly due to a fall in government sector spending.

“Construction activity had clearly slowed appreciably even before being hit markedly by December’s severe weather,” said Howard Archer, chief economist at IHS Global Insight.