LONDON (Reuters) - Falling business investment and the weakest household spending growth in more than three years marked a bad start to 2018 for Britain’s economy, as official data on Friday confirmed it almost stagnated.
Despite the Bank of England’s doubts, the Office for National Statistics (ONS) stuck to its view that bad weather alone could not explain why the economy grew just 0.1 percent between January and March, its weakest performance since 2012.
Instead, the ONS said it saw a longer-term pattern of slowing growth, especially among consumers who were hit by a rise in inflation after the 2016 Brexit vote.
With Britain’s exit from the European Union due in less than a year and the shape of their future relationship still uncertain, business investment dropped 0.2 percent quarter-on-quarter, its worst performance since mid-2015, the ONS said.
Net trade failed to contribute to growth and household spending edged up only 0.2 percent on the quarter, the weakest increase since the fourth quarter of 2014.
“Overall, the economy performed poorly in the first quarter, with manufacturing growth slowing and weak consumer-facing industries,” ONS statistician Rob Kent-Smith said.
Separate figures from banking industry body UK Finance showed slow growth in consumer lending in April and a YouGov/Cebr survey showed a decline in household confidence ahead of Brexit.
BoE Governor Mark Carney has said business investment would normally be growing much more strongly as the world economy prospers and was being held back by uncertainty about Brexit.
Britain’s economy stood 1.2 percent larger in the first quarter than its level a year ago. Only Japan has grown more slowly among the Group of Seven rich countries.
“The first-quarter figures probably overestimate the picture of underlying softness in the (British) economy and we should expect a bit of a rebound in the second quarter,” Berenberg economist Kallum Pickering said, pointing to a recent easing of inflation and a rise in wage growth.
Sterling and British government bonds were little changed by the data.
Earlier this month the BoE said it expected growth in the first quarter would eventually be revised up to 0.3 percent.
It has pencilled in quarterly growth of 0.4 percent for the current April to June period.
Still, after the weak first-quarter figures from the ONS, the BoE chopped its forecast for annual average growth in 2018 to 1.4 percent from 1.8 percent previously — in line with the consensus of economists polled by Reuters.
The ONS said household spending was just 1.1 percent higher in the January to March quarter than a year earlier, the weakest annual growth in six years.
The economy was helped by a 0.5 percent quarterly rise in government spending, the largest since early 2016.
Writing by Andy Bruce; Editing by Catherine Evans