Growth seen slowing in Q1

By Raissa Kasolowsky

LONDON (Reuters) - Analysts expect economic growth slowed in the first three months of 2008 as the credit crunch took its toll.

Analysts polled by Reuters expect economic growth during the first quarter to have fallen to 0.4 percent from 0.6 percent in the three months to December. Such a reading would be the weakest quarter on quarter rate in three years.

The annual rate is forecast to ease to 2.6 percent from 2.8 percent in the fourth quarter of 2007.

"We expect this year to start with further economic deceleration," David Page, an economist at Investec, said.

"Despite seeing two months' of robust manufacturing expansion, relative weakness in oil and gas extraction has restrained industrial production more widely."

Service sector growth is also expected to have slowed, although surprisingly strong retail sales data earlier on Thursday raised the risk of an upside surprise.

Retail sales rose by 2.0 percent in the first three months of the year compared with the previous three months -- the fastest three-month on three-month rate since July 2006.

"The strength in retail sales means a GDP print of 0.5 percent on the quarter looks more likely tomorrow, rather than the 0.4 percent we had pencilled in," said Malcolm Barr, economist at JPMorgan.