U.K. Economy Grows Faster Than Estimated on Construction
Friday, 29 June 2018 16:00 WIB | EUROPE |InggrisEkonomi inggris

U.K. construction industry fared far better than previously thought during a snow-blighted first three months of the year, giving an unexpected boost to the economy.

Building output fell 0.8 percent instead of the 2.7 percent estimated last month, the Office for National Statistics said Friday. Overall economic growth was revised to 0.2 percent from 0.1 percent. Separate figures showed the current-account deficit narrowing.

The GDP revision may fuel expectations that the Bank of England will raise its benchmark interest rate this year, with anecdotal evidence suggesting activity rebounded this quarter.

Speculation intensified this month after BOE Chief Economist Andy Haldane joined a minority of policy makers pushing for an immediate rate increase. In a speech on Thursday, Haldane cited cost pressures building in the labor market and an underlying picture of œgently rising household spending.™™

The latest GDP data incorporates annual Blue Book revisions. The upward revision to construction was partly offset by downward revisions to manufacturing and industrial production.

The BOE expects growth to be eventually revised up to 0.3 percent and sees the economy expanding 0.4 percent in the current quarter.

Services, the largest part of the economy, made a promising start to the second quarter, growing 0.3 percent in April.

But consumers remained under pressure in the first quarter, helping to explain the plight of retailers including high street bellwether John Lewis that already struggling against online rivals.

Real disposable incomes per head rose just 0.2 percent and households saved just 4.1 percent of their incomes, the least for a year. Households have been borrowers for six consecutive quarters, the longest streak on record, as rising prices squeeze domestic budgets.

Overall consumer spending rose 0.2 percent, the weakest since the end of 2016. Business investment fell 0.4 percent, more than previously estimated. Net trade made a modest 0.1 percentage point contribution to growth.

In a separate report, the ONS said the current-account deficit, the gap between money leaving the U.K. and money coming in, narrowed to 17.7 billion pounds between January and March. That left the shortfall at 3.4 percent of GDP, the lowest for a year.

The figures may help allay concerns about the willingness of foreign investors to fund the deficit by buying British assets as the U.K. prepares to leave the European Union.

The improvement came as the trade deficit narrowed and the deficit on investment income declined.

Source: Bloomberg

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