First quarter slowdown '˜worse than expected'

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.3% in its initial estimate for the first quarter of 2017, down from 0.7% in the fourth quarter of last year.

Economists had been expecting GDP growth to slow as consumers tightened their belts in the face of rising inflation, but they had pencilled in a higher growth figure of 0.4%.

The ONS said: “There were falls in several important consumer-focused industries, such as retail sales and accommodation; this was due in part to prices increasing more than spending.”

Britain’s powerhouse services sector, which accounts for 78% of the UK economy, put downward pressure on overall growth after expanding by 0.3% between January and March this year, slowing from 0.8% between October and December of 2016.

The main drag came from the hotels, restaurants and distributions sector, which fell by 0.5%, as increasing prices from rising inflation applied the brakes to retail trade and accommodation services growth.

Output in the construction sector was also dragging on GDP after expanding by 0.2% in the first three months of the year following 1% growth in the fourth quarter of 2016.

Production expanded by 0.3% over the period, with manufacturing increasing by 0.5% thanks to a jump in motor vehicle manufacturing, while agriculture growth eased to 0.3% in the first quarter from 1% in the final quarter of 2016.