The UK economy slowed sharply at the end of 2018, official data showed on Monday, defying analyst expectations and weighing heavily on annual Gross Domestic Product (GDP) growth.
The Office for National Statistics (ONS) said that economic growth slowed to just 0.2% in the last three months of the year, below consensus forecasts of around 0.3% and down on the 0.6% seen in the three months to September. In December, GDP fell 0.4%, against analyst expectations for either little or no growth.
As a result, annual GDP growth was just 1.4%, the lowest since 2012
Rob Kent-Smith, head of GDP at the ONS, said: “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 growth with the health sector, management consultants and IT all doing well.
“Declines were seen across the economy in December, but single month data can be volatile, meaning quarterly figures often give a better indication of the health of the economy.”
Services output increased 0.4% in the fourth quarter. Professional, scientific and technical activities made the largest contribution, with 0.15 percentage points, while wholesale, retail and the motor trade provided the biggest drag, contributing -0.11 percentage points.
Production fell 1.1% in the quarter, which the ONS said was due mainly to a fall of 0.9% in manufacturing; it is the first time since early 2009 that all four sectors have fallen during a quarter.
Construction was down 0.3% compared to an increase of 2.1% in the third quarter.
David Cheetham, chief market analyst at XTB, called December’s 0.4% decline “particularly concerning”.
He added: “This is the largest drop since the month-on-month figures were first released last July, and while it is obviously volatile and short term in nature, it does represent a potential warning sign.
“The more widely viewed quarterly figures showed a paltry increase of 0.4%, and while it would be a little presumptuous to conclude that we are heading for an imminent recession, the pace of growth is clearly slowing and the economy far from firing on all cylinders.”
Ben Brettell, senior economist at Hargreaves Lansdown, said: “There’s little doubt Brexit uncertainty is responsible for the disappointing numbers, though concerns over global trade will also have played a part. Business investment – the most Brexit-sensitive element of GDP – dropped 3.7% in the fourth quarter against a year earlier, the biggest fall since early 2010.”
Neil Wilson, chief market analyst at markets.com, said: “The economy grew at a slower pace over the entirety of 2018 than most of us had anticipated. Growth stumbled to 1.4%, the weakest in six years and down from 1.8% in 2017. Coupled with signs of a slowdown in January, it does not suggest the economy is at its healthiest.”
Economists attributed the poor performance to Brexit uncertainty but also to a weaker global economy, with the eurozone in particular struggling and trade talks between China and the US as yet unresolved.
Sterling dropped slightly on the data and at 10.15 GMT was trading around $1.29.