The UK economy grew faster than expected over the summer but appears to have juddered to a halt in August.
Data from the Office for National Statistics (ONS) released this morning, showed the economy grew by 0.7 per cent in the three months to the end of August.
Growth for June and July had been revised upward, but in August the first estimates suggest the economy did not grow at all.
Ben Brettell, senior economist at Hargreaves Lansdown, said the quarterly figure was better than expected but the data for August was a cause for concern.
He said: “Worryingly the dominant service sector has experienced a significant slowdown in growth over the past year or so, with an emerging trend for growth of around 1.5 per cent year on year.”
The ONS data came as the International Monetary Fund (IMF) revised downwards its projection for UK growth in 2018 to 1.1 per cent, having previously forecast it would be 1.3 per cent.
The IMF warned the UK’s public finances were among the worst in the world and, after compiling what was essentially a balance sheet for the UK economy, said that on this basis the UK government had a negative net worth of more than £2trn.
Mr Brettell said: “Overall though the picture is still one of muddling through. Strong growth over the summer is likely to reassure policymakers that the recent interest rate rise was warranted, but they’ll be hoping to see the momentum maintained as Brexit approaches.
“Markets are still pencilling in a further rise around the middle of next year – though clearly a disorderly Brexit would pose a significant risk to that outlook.”
Jacob Dieppe, head of trading at Infinox, said: “The economy hasn’t given up the fight but it’s by no means firing on all cylinders. It’s somewhere in between and that will add to the uncertainty surrounding our exit from the EU.
“Optimists will see the August flatline as mere seasonal fall-out, cynics will see it as symbolic of a deeper malaise. What few will deny is that the disproportionate contribution of the services sector leaves the UK very exposed in the event of a fractious Brexit.
“If consumers sit tight, the rate of growth could quickly contract, all the more so if the Pound weakens further and drives up inflation.”
Source: FT Adviser