Britain's economy slowed sharply in the first three months of 2015, gross domestic product grew by 0.3 percent in the January-March period, the slowest quarterly rate since the end of 2012. The UK's initial estimate of Q1 GDP was 0.3%, below expectations for a 0.5% expansion, and half the pace of Q4 2014 growth. Sterling initially fell on the disappointment but quickly resurfaced.
Economists said the weakness was likely to be a blip, with the economy still on course for another strong year of growth. But coming just nine days before what looks like being the closest national election in a generation, the numbers put Cameron's Conservatives on the back foot.
The preliminary estimate of Q1 UK GDP lacks details and is based on less than half of the information that will ultimately go into the final estimate. ONS indicated the slowdown was led by the service sector, which expanded by 0.5%, the least since Q2 2013. Production fell 0.1%, and construction output fell 1.6%. The 2.4% year-over-year growth compares with a 2.6% expectations and 2.7% growth in 2014.
An opinion poll on Tuesday gave the Conservatives a one percentage-point lead over Labour, the latest in a string of polls pointing to deadlock in the campaign. The preliminary reading of GDP is largely an estimate and the figures are often revised. The chief economist at the Office for National Statistics, Joe Grice, warned against reading too much into the data. But the growth rate was half that of the last three months of 2014 and below the median forecast for only a marginal slowdown to 0.5 percent from a previous reading of 0.6 percent.
The weak first-quarter growth contrasts with an upbeat tone from the Bank of England at its latest monetary policy meeting, and most economists expect the economy to keep its momentum in 2015 after last year's growth of 2.8 percent. "We think underlying growth in the economy is significantly stronger than in today's data," said Kevin Daly, an economist at Goldman Sachs. "We would anticipate over time that the weak ONS data is likely to be revised higher into line with the stronger activity implied by business surveys and other activity indicators." But some economists have said an inconclusive outcome of next week's elections could hurt confidence and slow investment.
Consumer confidence unexpectedly declined in April to a four-month low as Americans’ views of the labour market and the outlook on the economy deteriorated. The fewest respondents in four months said jobs were plentiful in April and income expectations cooled, the report showed, signalling consumers will remain guarded about spending. The setback in sentiment may indicate demand will be slow to pick up after a stronger dollar, bad winter weather in some regions and a labour dispute at West Coast ports weighed on the economy in the first quarter.
All Day – EUR – German Preliminary CPI m/m
12:30 – USD – Advance GDP is expected to fall
18:00 – USD – FOMC Statement
18:00 – USD – Fed Funds Rate
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