Pound stumbles to 7-week low after UK GDP significantly disappoints

Pound stumbles to 7-week low after UK GDP significantly disappoints

Pound stumbles to 7-week low after UK GDP significantly disappoints

It was the weakest quarterly growth since the fourth quarter of 2012 and worse than economist predictions for a slowdown to 0.3%.

Sterling tumbled as much as 1.1 per cent versus the greenback to 1.375 - its lowest level in almost two months and dropped 0.9 per cent against the eurozone currency to 1.138.

The worse-than-expected growth figures dampen prospects of an interest rate hike beyond 0.5 per cent by the Bank of England's Monetary Policy Committee on May 10.

Rob Kent-Smith, head of national accounts at the ONS, said: "Our initial estimate shows the United Kingdom economy growing at its slowest pace in more than five years with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly". Likewise, Lloyds' Business Confidence Barometer and the BCC's Quarterly Economics Survey suggested the United Kingdom economy would grow by of 0.4 per cent in the latest quarter.

In year-on-year terms, growth slowed to 1.2pc from 1.4pc, its weakest since the second quarter of 2012 and a rate likely to keep Britain lagging behind its worldwide peers.

But the findings have brought out the feeblest of excuses from the government, with Chancellor Philip Hammond blaming last month's "Beast from the East".

As usual, services, the dominant sector of the United Kingdom economy, accounted for the majority of growth over the data period. Against the euro, the pound dropped to EUR1.1442 from $1.1497 late Thursday.

The services industry was the largest contributor, increasing 0.3%, however the ONS said a longer-term trend highlighted a weakening in the sector.

The scale of the economic slowdown may unsettle the Bank of England, which meets next week to consider whether to raise rates for only the second time since the 2008 financial crisis.

Investors in the United Kingdom slashed bets for an imminent interest-rate increase after the United Kingdom economy had its worst quarter since 2012.

Markets had been expecting the BoE to hike in May, but a string of weaker than expected data, as well as dovish comments from Governor Mark Carney, had subdued those hopes.

Market expectations of a rate hike in May more than halved on Friday to 20 percent from around 50 percent before the GDP data. "The 0.1% quarterly rise was below the consensus estimate and the MPC's forecast of 0.3%", Paul Hollingsworth, a senior United Kingdom economist at Capital Economics said in an email.

The GDP data was "worse than feared", according to Ben Brettell, senior economist at Hargreaves Lansdown.

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