UK suffers 'notable slowdown' as GDP rises by just 0.3% in Q2 2017 - as it happened
Rolling coverage as Britain's economy posts its weakest six months of growth since 2012
- UK economy grew by 0.3% in April-June
- ONS: It's a notable slowdown
- Analyst: It's 'grim' compared to last year
- Worst six months since 2012
- Service sector expanded by 0.5%, but manufacturing shrank
- Film industry is booming!
- Introduction: It's UK GDP Day
5.50pm BST
A number of positive US corporate results - notably Boeing - and a jump in the oil price helped to push stock markets higher. European indices ended in the red, even as Wall Street hit new peaks ahead of the latest US Federal Reserve meeting. There is little expectation of any excitement from the Fed, however. Joshua Mahony, market analyst at IG, said:
This afternoon sees investors focus on the latest appearance from Yellen and co, at what promises to be a relatively uneventful meeting by historical standards. With the Fed Funds rate showing a 0% chance of a rate rise, and little chance of a balance sheet reduction being announced today, it is the linguistics which really matter. With no press conference from Yellen to contend with, markets will be keeping a close eye out for any mention within the accompanying statement of a potential September balance sheet reduction, alongside any reference to recent inflation disappointment.
5.37pm BST
Late news from the UK banking sector. The UK and European Union have agreed a deal to avert state aid issues surrounding Royal Bank of Scotland's Williams & Glyn business. PA explains:
Royal Bank of Scotland is likely to avoid the compulsory sale of its Williams & Glyn branches by doling out 835m to help boost competition among UK banks
It follows a joint review by the European Commission (EC) and HM Treasury, which have put forward the "alternative remedies package" that will help fulfil RBS's state aid obligations following its Government bailout at the height of the financial crisis.
4.28pm BST
Here's Reuters on the jump in the oil price following the US crude stock figures:
Oil prices rose to near eight-week highs on Wednesday, with Brent crude futures at over $50 a barrel, as a fall in U.S. inventories bolstered expectations that the long-oversupplied market was moving toward balance...
U.S. crude stocks fell last week as refineries hiked output and imports dropped, while gasoline stocks decreased and distillate inventories fell, the Energy Information Administration said on Wednesday.
3.45pm BST
Oil prices, already on the rise on signs that recent output cuts could be having an effect, have gained more ground after a bigger than expected weekly fall in US crude stocks.
Crude inventories fell by 7.21m last week to 483.42m barrels, much higher than the forecast 2.6m decline, according to the Energy Information Administration. Gasoline stocks fell by 1.02m barrels compared to the expected 0.6m barrel drop.
3.31pm BST
Connor Campbell, financial analyst at Spreadex, said:
Just as this afternoon looked like it was going to settle into some traditional pre-Fed dreariness the Dow Jones surged to a fresh all-time high off the back of a decent set of earnings.
Boeing ended-up being the stock to spark the Dow's lift-off, the jet maker surging more than 8% after beating EPS estimates and raising its full year guidance. This helped the US index rise by 110 or so points after the bell, taking it above 21700 for the first time in its history (for those keeping track, that's roughly 3300 points gained since Trump won the election last November).
3.06pm BST
US home sales came slightly below forecast last month.
June single family home sales rose 0.8% to 0.610m units, compared to expectations of a figure of 0.615m. The May figure was revised down from 0.610m to 0.605m.
2.43pm BST
U.S. stock mkts start on front foot after more well received mega earnings, eg #BOEING, & more major reports ahead: #PAYPAL #BOEING $FB ^KO
2.38pm BST
A raft of positive company results, including Boeing and AT&T, has pushed Wall Street to new record levels.
The Dow Jones Industrial Average hit a new peak of 21,711 shortly after the market opened, while the Nasdaq Composite rose 0.22% and the S&P 500 0.12% to record levels.
BREAKING: Dow, S&P 500 and Nasdaq open at all-time highs https://t.co/t65QcRetDC pic.twitter.com/xQVGNzhnNw
2.25pm BST
Chancellor Philip Hammond has been speaking to Sky about the UK economy:
There is a degree of uncertainty aound the UK economy in particular because businesses and consumers are looking for clarity about what our future relationship with the European Union will be. That's why we attach importance to as early as possible agreeing what the interim arrangements will look like as we leave the European Union in March 2019 and move to a long term different kind of arrangement with the EU. The earlier we can get agreement on transitional arragnements the greater clarity business and consumers will have. So that's definitely the first port of call..in removing some of this uncertainty.
I think the right way to go forward is to preserve some headroom within our fiscal rules so that if the economy starts to slow we have the ability to respond and support it, but to be very clear that our intention is to get back to living within our means.... to balance the budget by 2025 and make steady progress to doing that.
1.57pm BST
Graham Toy, chief executive officer of the National Association of Commercial Finance Brokers, is relatively upbeat about the GDP figures, all things considered, but is worried about rising consumer credit. He says:
The economy isn't firing on all cylinders but neither is it out for the count.
In fact, faced with such political uncertainty, the economy is proving to be remarkably resilient.
1.46pm BST
Sterling has taken today's UK growth report in its stride.
The pound didn't show any positive reaction in the immediate aftermath of the data release as the number was bang in line with the expectations. Yet equally, the sellers had little desire to show up.
1.15pm BST
Britain's economy is currently running some way below its potential, according to this chart from the National Institute of Economic and Social Research.
The economy will probably continue to perform at sub-par levels and this importantly this implies only a minor improvement in income per head this year, which is a better measure of welfare than GDP alone.
Indeed there are signs that for many households consumption will be crimped as the year progresses with a fall in real disposable income and credit availability drying up".
12.51pm BST
We don't yet know how Britain's performance compares to its rivals.
The UK is the second major nation to report second-quarter growth figures after China, which grew by an annual rate of 6.9% [roughly a quarterly rate of 1.7%].
For reference vs UK GDP Q1 0.2%, Q2: 0.3%. Germany Q1 0.6%, Q2 0.6% (forecast by fin ministry). France: 0.4, 0.5 (forecast, out on Friday)
12.05pm BST
Here's economics editor Larry Elliott's take on today's GDP report:
Britain's economy grew by just 0.3% in the second quarter of 2017 after what government statisticians called a "notable slowdown" in the first half of the year.
The expansion in the three months to June followed 0.2% growth in the first quarter and was in line with City expectations for the eagerly awaited first estimate of the economy's recent performance.
Related: UK GDP: economy grows by just 0.3% amid 'notable slowdown'
11.23am BST
This chart underlines how the service sector has driven UK growth for years.
11.09am BST
Although Britain's economy is growing, it would be growing rather faster without the disruption and uncertainty created by Brexit.
So says Kallum Pickering, senior UK economist at Berenberg bank:
Since the Lehman recession, the UK has sat comfortably at the top of the G7 growth league. But whereas growth has accelerated significantly so far this year in continental Europe and many emerging markets, the UK is missing out.
While the downside risks from the Brexit vote have not yet played out in a major way, the uncertainty stemming from Brexit is leading to caution in all areas of spending and policy that have long-term implications.
10.44am BST
Experienced City analyst George Magnus warns that Britain is vulnerable if the global economy falters:
Just out that UK GDP +0.3% in Q2, barely more than Q1 with world economy on 3rd gear. Now imagine world slowdown 2018/19.... https://t.co/GcJ8QrHtkc
We expect the Bank to keep policy unchanged until we have greater clarity on what is happening to underlying inflationary pressures in the labour market."
Growth would have been expected to be negatively impacted by the political shocks which came part way through the quarter with the unexpected General Election result and the associated currency weakness affecting the domestic inflation picture.
The Office for National Statistics noted that the UK experienced "a notable slowdown" in the first half of the year, reflective of the continuing uncertainty surrounding the Brexit process. This follows on from the IMF earlier this week cutting its 2017 growth forecast for the UK to 1.7% from 2%. The outlook isn't as rosy as some suggest and affirms our cautious view on UK assets, particularly domestic equities and sterling.
10.27am BST
Rain Newton-Smith, the CBI's Chief Economist, says Britain's economic growth "remained sluggish" in the last three months.
Worryingly, she expects this to continue for a while....and is urging the government to negotiate a 'transition' deal to help companies after the UK leaves the EU.
We expect growth to remain lukewarm over the next couple of years, so providing businesses with certainty and stability has never been more important.
"A limited transition period as we leave the EU where the UK stays in the single market and a customs union until a final deal is in force, would help create a bridge to a new trading arrangement. It would give businesses the confidence they need to invest, expand and create jobs."
10.18am BST
This table shows how the UK service sector drove growth in the last quarter, while industrial production and construction shrank:
UK GDP in Q2 rose 0.3% vs Q1. Breakdown by sector:
Industrial Production -0.4%
Manufacturing -0.5
Construction -0.9%
Services +0.5% pic.twitter.com/JBzxjcnP2w
10.17am BST
On a per-capita basis, UK GDP rose by only 0.1% in the last quarter.
In other words, if you adjust for population changes, Britain's economy barely grew at all.
10.13am BST
Political reaction to the GDP figures is coming in now.
"Our economy has grown continuously for four and a half years, delivering record levels of employment. We can be proud of that; but we are not complacent.
We need to focus on restoring productivity growth to deliver higher wages and living standards for people across the country. That is why we are committed to investing in infrastructure, technology and skills to deliver the best possible base for strong future growth."
"Today's GDP figures reveal weak growth under a weak government, and expose the last seven years of Tory economic failure.
"Growth for the first half of 2017 is below expectations, and it follows continued data showing working families are being squeezed with wages not keeping up with prices.
10.11am BST
Ranko Berich, Head of Market Analysis at Monex Europe, says the overall picture of the UK economy this year is "grim" compared to 2016.
And that means there's little room for the Bank of England to consider raising interest rates.
"Despite frothy optimism in sector survey data, manufacturing failed to make a positive contribution to GDP growth, but if the latest surveys are to be believed this may change in the second half of the year.
"The main takeaways from today's figures are that the UK economy continues to live and die by the consumer, and the business investment pickup hoped for by the Bank of England has not yet materialised.
10.01am BST
Britain's film industry has played a significant role in the modest growth in GDP in the last three months.
9.54am BST
On the upside, this is the 18th quarter of growth in a row.
But on the downside, Britain has now recorded its weakest six months of growth since 2012.
U.K. GDP growth is 0.3% in Q2. Following Q1"^2s 0.2% that means this is the weakest first half of the year in five years
9.51am BST
Growth is "clearly becoming harder to come by" in the UK, says Nancy Curtin, chief investment officer at Close Brothers Asset Management.
Curtin adds:
The competitive pound has boosted exports, as has increasing global demand. However, weakening consumer spending power is a real concern. The lack of real-terms wage inflation also continues to drag, as does low productivity.
What's more, companies still do not have clarity on the nature of Brexit, which is impeding long-term investment decisions.
9.49am BST
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9.48am BST
There's scant evidence that Britain's economy has rebalanced during the last three months.
While the service sector grew by 0.5%, manufacturing output actually contracted by 0.5% during the quarter.
9.42am BST
Britain's economy is now 9% above its pre-downturn peak, says the ONS.
9.39am BST
Today's report shows that Britain's economy has experienced a " a notable slowdown in the first half of this year", says ONS Head of National Accounts Darren Morgan said:
That's because GDP only grew by 0.2% in January-to-March, and then by 0.3% in April-to-June - both below the long-term growth trend.
"While services such as retail, and film production and distribution showed some improvement in the second quarter, a weaker performance from construction and manufacturing pulled down overall growth."
9.36am BST
Today's figures also show that the UK economy has expanded by 1.7% over the last 12 months, down from 2% three months ago.
UK economy grew 0.3% in Q2 (up from 0.2% in Q1) and 1.7% annually (down from 2% in Q1), both in line with forecasts.
9.32am BST
Britain's service sector drove the economy in the last quarter, with output rising by 0.5%.
But, as feared, industrial output shrank by 0.4% and construction contracted by 0.9%.
9.30am BST
BREAKING: Britain's economy grew by 0.3% in the second quarter of 2017.
That's up from 0.2% in the first quarter, and in line with City forecasts.
9.26am BST
The tension is building....
Latest UK economic growth figures for the second quarter of 2017 due out at 9:30. Consensus forecast is for growth of 0.3%q/q. pic.twitter.com/9Yj5RN4yTX
9.11am BST
The pound is creeping higher as City traders get ready for the growth figures in 20 minutes time.
Sterling has gained 0.3% against the euro, to a1.12. It's also a little higher against the US dollar, at $1.303.
9.04am BST
Andy Bruce of Reuters confirms that most economists expect a modest increase in UK growth:
Pretty tight range of forecasts for tomorrow's UK prelim GDP number (+0.2% to +0.4%) in @ReutersPolls
Overall the UK economy looks it is moving to the bottom of the G7 growth league table, though it should be added that it is currently not headed for recession.
8.53am BST
If you really want know what's happening in an economy, GDP is a rather blunt tool.
It tries to measure the total value of all of the goods made, and services provided, in an economy, to show whether it grew or shrank.
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and its counts nuclear warheads and armored cars for the police to fight the riots in our cities.
8.27am BST
Gross domestic product (GDP) is a key government statistic and provides a measure of the UK's total economic activity.
8.20am BST
Many City economist have warned that today's UK growth figures may show little improvement on the first quarter of this year.
We estimate the economy expanded by 0.3% quarter-on-quarter, which is not much stronger than the 0.2% q/q growth rate in Q1 (the weakest among the EU member states). The main reason is that private consumption has slowed, as the weaker pound is eroding consumer purchasing power.
After considering the pattern of activity in construction and industrial production in April and May, and the headwinds for the consumer that have been constraining elements of service sector growth, we now consider that it would take an unlikely combination of positive news across all sectors in June to get to growth of 0.4% q/q overall.
"It looks odds-on that whatever growth the UK managed to eke out in the second quarter will have been solely due to the services sector.
"This does appear to have seen some pick-up in activity after a particularly weak first-quarter performance.
7.58am BST
Good morning!
We're about to discover how well, or badly, Britain's economy performed in the last three months.
Continue reading...