State of the Economy: June 2018

United Kingdom Summary

GDP growth slowed in Q1 2018.

• UK GDP (second estimate) grew 0.1% in the first quarter of 2018, down from 0.4% growth in Q4 2017.

• The Service sector grew 0.3% in Q1, with Business Services and Finance driving growth while output from Retail and Distribution, Hotels and Catering fell slightly.

• The Production sector grew 0.6% in Q1 supported by 2.2% growth in Mining and Quarrying while Manufacturing growth slowed to 0.2%.

• Construction sector output contracted 2.7% in Q1, the weakest quarterly construction growth since 2012

Labour market performing strongly at start of 2018.

• Latest data for Feb-Apr 2018 show that the employment rate has risen to 75.6%.

• The unemployment rate has fallen over the recent quarter and year to 4.2%.

• The inactivity rate has fallen over the recent quarter and year to 21.0%.

• Nominal earnings growth (regular pay) eased to 2.8% while real wages grew 0.4% over the year to Feb-Apr 2018.

• Labour productivity growth rebounded in the second half of 2017, growing 0.7% in Q4 and 0.6% over the year.

Inflation on a downward trend in 2018.

• CPI inflation in May was unchanged from April’s rate of 2.4%. The rate of inflation has slowed from 3.0% in January, as the effects of Sterling’s past depreciation fade.

• The recent fall in inflation and softer output performance have led the MPC to keep the Bank Rate unchanged at 0.5% since November 2017.

UK growth forecasts soften for 2018.

• Growth is forecast to slow in 2018 with the Bank of England forecasting growth of 1.4%, accelerating to 1.7% in 2019.

• The slower growth outlook reflects temporary weather related headwinds at the start of 2018 alongside underlying heightened uncertainty and weak productivity growth.