Britain’s economy grew faster than expected in the first quarter of 2018, boosted by a stronger than thought construction industry.
Revised data released by the Office for National Statistic today upgraded growth for January to March from 0.1 per cent to 0.2 per cent.
The increase is a boost for Chancellor Philip Hammond but the growth figure is still half what it was a year ago. The slowdown was blamed on the cold winter weather.
Better growth will fuel prospects of an interest rate hike from the Bank of England.
Revised data released by the Office for National Statistic today upgraded growth for January to March from 0.1 per cent to 0.2 per cent
The increase is a boost for Chancellor Philip Hammond (pictured at Mansion House last week) but the growth figure is still half what it was a year ago. The slowdown was blamed on the cold winter weather
The ONS raised the figure in its final estimate after a notable upward revision in construction output, which mainly reflects improvements to the way the sector’s work is measured.
ONS head of GDP Rob Kent-Smith said: ‘GDP growth was revised up slightly in the first three months of 2018, with later construction data, and significantly improved methods for measuring the sector, nudging up growth.
‘These improved methods, introduced as part of ONS’s annual update to its figures, will lead to better early estimates of the construction sector with smaller revisions in the future.’
The pound spiked in the wake of the data, rising 0.7 per cent against the US dollar to trade at 1.317. Versus the euro, sterling was nearly flat, at 1.130.
Construction output growth was revised up by 1.9 percentage points over the quarter to negative 0.8 per cent, while production output was revised down by 0.2 percentage points to 0.4 per cent. Services sector growth was unrevised at 0.3 per cent.
The ONS reiterated that the overall impact of extreme wintry weather caused by the Beast from the East on output in the first quarter ‘appears to be relatively small.’
Despite today’s upgrade, the economy has continued to slow at the start of 2018 compared to last year and growth is markedly weaker than before the EU referendum
The Bank of England’s Monetary Policy Committee (MPC) now be watched closely for hints that an interest rate rise may be pushed through sooner rather later, with some voting members having previously held off following the sharp slowdown in growth.
Howard Archer, chief economic advisor at EY ITEM Club, said the upward revision to GDP, as well as the recent evidence of a pick-up in retail sales in the second quarter, ‘fuels our belief that the MPC is more likely than not to hike interest rates from 0.50% to 0.75% at their August meeting.’
‘There is likely to be only one interest rate hike in 2018, leaving interest rates at 0.75% at the end of the year.
‘We expect the Bank of England to raise interest rates twice in 2019 taking them up to 1.25% as it looks to gradually normalise monetary policy.’