UK growth downgrade possible after run of weak figures


A day after the Bank of England hinted that it could raise interest rates faster than many expected, a run of economic figures on Friday suggest the British economy did not end 2017 as strongly as previously thought.

Official figures showed a 1.3 percent monthly decline in industrial production in December and a 4.9 billion-pound ($6.9 billion) trade deficit for goods and services, its worst since September 2016. Though construction output was stronger than anticipated, expanding by 1.6 percent during the month, some economists say that the figures could lead to economic growth being revised down.

"Today's data reinforces the message that the U.K. continues to underperform other developed market economies, growing at around half the rate of the U.S. and the eurozone," said James Knightley, chief international economist at ING.

"As such, while the Bank of England is clearly hinting at the potential for a May rate hike, we remain cautious on the longer term path for rates, particularly given the Brexit-related uncertainty."

Last month, the Office for National Statistics estimated that the economy grew 0.5 percent in the fourth quarter from the previous three-month period, a better-than-expected outturn that partly allowed the Bank of England on Thursday to talk up the chance of more rate increases.

Investors moved swiftly to price in a growing likelihood of a quarter-point interest rate hike in May to 0.75 percent, which would be the bank's second increase in six months. With unemployment at multi-decade lows and the global economy growing strongly, policymakers at the central bank are concerned that inflation is building. The Bank of England is tasked with setting rates to keep inflation near 2 percent. In December, it stood at 3 percent.

Even if fourth-quarter growth is not downgraded when the next estimate is published later this month, the trade figures are likely to provide rate-setters on the Bank's Monetary Policy Committee with pause for thought. Governor Mark Carney had said exporters were in a "sweet spot" at the moment — still in the European Union ahead of Brexit but also benefiting from the fall in the pound after Britain voted to leave the EU.

"The latest trade figures should temper the MPC's optimism that the economy is rebalancing and enjoying a trade boost," said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.


Reader Comments ...


Next Up in Nation World

Rev. Billy Graham chose John 14:6 to be placed on his grave marker
Rev. Billy Graham chose John 14:6 to be placed on his grave marker

Before his death, Rev. Billy Graham chose one of his favorite Scripture verses from the Bible to be placed on his grave marker. Graham selected John 14:6 and the following inscription to be on his marker: BILLY GRAHAM NOVEMBER 7, 1918 – FEBRUARY 21, 2018 PREACHER OF THE GOSPEL OF THE LORD JESUS CHRIST JOHN 14:16 John 14:6 reads, “Jesus...
Teen’s warning thwarts possible school shooting in Vermont
Teen’s warning thwarts possible school shooting in Vermont

A high school junior in New York may have prevented an 18-year-old man from carrying out a shooting last week at a Vermont high school, the Poughkeepsie Journal reported. Angela McDevitt, 17, who attends Arlington High School in Lagrangeville, New York, said she was trading Facebook messages with Jack Sawyer of Poultney, Vermont, when he...
Great Miami River expected to crest this weekend: Where will flooding occur?

As a Flood Watch remains in effect for the southern Miami Valley counties through Sunday morning, creeks, streams and fields will likely flood, said Storm Center 7 Meteorologist Kirstie Zontini. “Creeks and streams, if not already, will likely be out of their banks through the weekend,” she said. “Fields will also be flooded...
Heavy rain, low visibility possible for morning commute; Flood Watch in effect
Heavy rain, low visibility possible for morning commute; Flood Watch in effect

A Flood Watch is in effect for Montgomery, Preble, Clark, Greene, Butler, Warren and Clinton counties until Sunday morning. More rain pushes in for the morning Heavy showers and some thunderstorms possible Saturday Dry start to next week Today: There will be mist and fog early before heavy rain continues to...
Police: Student was punched, spat on before dorm stabbing
Police: Student was punched, spat on before dorm stabbing

A Georgia State University student walked up to another student, spat on him and punched him before the suspect stabbed him multiple times in a university dorm, the school’s police chief said Thursday. University and Atlanta police responded to a call about the fight Tuesday, GSU police chief Joe Spillane said. Nakia Roach was found in the the...
More Stories