The UK economy continues to grow, according to the Q4 GDP data, but the bad news is that it is growing at the slowest annual rate since 2012. According to data released by the Office for national Statistics (ONS) the UK economy expanded by just 0.2% in the final quarter of 2018. Analysts had anticipated that growth would drop to 0.3%, a more modest decline than seen. This level of performance marked a sharp decrease in the rate of growth from the previous quarter which came in at 0.6%. A sharp decline in construction activities in December was blamed, in part, for the less than stellar economic output in the quarter. Declines in manufacturing output and car production also contributed to the poor economic growth data.
The full year growth figure for 2018 came in at 1.4%, down on the 1.8% level seen twelve months earlier and the worst annual performance for six years.
The chancellor of the exchequer sought to talk up the data, claiming that the economy was “fundamentally strong” and that he thought a recession was unlikely – this is whistling down the wind when a “no deal Brexit” remains possible; an outcome he described as “catastrophic” for the economy. The economic news and continuing Brexit angst caused Sterling to retreat against the Dollar to $1.29.
Bearing in mind the picture painted for the slowdown of the services sector from the most current PMI data, the ONS’s boss, Rob Kent-Smith, had this to say of the Q4 figure: "GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well."
The PMI data for January for the service sector suggest that the slowdown is gathering pace, but Kent-Smith’s comment relates to older data, of course.