More signs of a Brexit slowdown hitting the United Kingdom economy

UK GDP chart

UK GDP chart

The latest figures from the ONS found that the economy grew by 0.3% thanks to growth in retail trade - which improved after a fall in the first quarter - and film production and distribution.

Of the three big sectors of the economy, only services were bigger at the end of June than in March, posting growth of 0.5% over the quarter. On Monday, the International Monetary Fund downgraded its forecast for UK GDP growth to 1.7% from 2.0% previously.

"Construction and manufacturing were the largest downward pulls on quarterly GDP growth, following two consecutive quarters of growth", the ONS added in a statement.

The UK economy expanded by 0.3 per cent in the second quarter of 2017, in line with consensus forecasts, as a slump in the pound and a spike in inflation continued to weigh on growth.

"Notwithstanding more hawkish tones from some MPC members, we think that with today's figures in hand, it's unlikely that the Bank of England will look to hike interest rates next week", wrote Dean Turner, an economist at UBS wealth management, to clients. The services aggregate was the main driver to the growth in GDP, contributing 0.42 percentage points.

Looking at the forex markets, sterling despite showing relative resilience against the greenback in recent weeks, fell slightly from $1.3025 prior the data release to a low of $1.2998.

"The Office for National Statistics noted that the United Kingdom experienced "a notable slowdown" in the first half of the year, reflective of the continuing uncertainty surrounding the Brexit process".

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Economists in a Bloomberg survey see the economy slowing to 1.6% this year and 1.3% in 2018.

Azad Zangana, senior European economist at Schroders, said: "We forecast some improvement in the second half of the year as inflation starts to abate, but we doubt growth will return to above trend levels for at least a year".

"This weak performance underpins the fact that British living standards are withstanding yet another squeeze, with real disposable household incomes falling for the last three quarters".

Professional services firm PwC expects GDP to grow by 1.5 percent in 2017, revising down a previous estimate of 1.6 percent growth.

Construction output also paid back much of the 1.1 percent gain seen in the first quarter, declining some 0.9 percent.

Wednesday's figures show that the economy, which had initially weathered well the uncertainty of the Brexit vote a year ago, is in a new, weaker phase.

"UK GDP grew by 0.3% in Q2 according to the Office for National Statistics, which follows growth of 0.2% in Q1".

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