UK GDP growth revised down after fall in spending

The Bank of England is anticipating a pick-up in wage growth soon - a key reason why it recently signalled that interest rates were likely to rise faster and to a greater extent than previously thought. Offsetting that, the three months to September was revised up to 0.5 per cent.

"There are signs that average weekly earnings, which rose by 2.5 per cent in the fourth quarter, are beginning to respond to the tightness of the labour market, although households are still feeling the squeeze when accounting for inflation, with real earnings falling by 0.3 per cent".

The total number of people in work came in at 32.15 million in the last quarter of a year ago, which is 88,000 more than the previous quarter and 321,000 more than October to December 2016.

So used to the "productivity puzzle" have economists become that when the ONS estimated productivity growth of 0.9% in the third quarter of past year, many dismissed it as a blip.

Stephen Clarke, senior economic analyst at think-tank the Resolution Foundation said: "It's early days but the evidence points to a plateauing in employment growth and pay pressure building". Most agreed that devaluations just make people "poorer", a view reflected in consumer behavior and retail sales over the past year.

The Pound had already hit the ropes earlier in the Thursday morning session and was still marked down in the red after the ONS report's release, with the steepest losses seen against a resurgent Japanese Yen and the Australian Dollar. Businesses, too, have taken a more cautious approach on investment as they seek clarity over the post-Brexit economic landscape.

The headline unemployment rate, which measures the percentage of the British workforce who want a job but don't have one, rose from 4.3% to 4.4%.

Sterling remained under pressure following the update, slipping 0.2 per cent against the U.S. dollar at 1.38.

"The big picture has not changed", said John Hawksworth of PricewaterhouseCoopers (PwC).

The Bank of England can not allow itself to raise rates too soon for fear of sabotaging Britain's already sputtering economic growth.

On a year-on-year basis, the United Kingdom economy grew by 1.4 per cent in the last quarter of 2017.

Separately on Thursday the CBI's latest survey of retailers showed a slowing of growth in the year to February. This was down from 12 per cent in January.

  • Wendy Palmer