In the UK, economic growth hit a new low at a rate of only 0.3% for the beginning of the year. According to the Office for National Statistics, this drop in growth was due to a decline in the Service Sector. The last time economic growth hit an all-time low was in 2016 when the rate was at 0.8%. The fact that the January-to-March period yielded more than a 50% decrease from last year is cause for worry amongst UK officials.
As inflation continues to rise, economists had planned for a decrease in Gross Domestic Product growth. However, their estimate remained at a hopeful 0.4%. Unfortunately, the reality is much different. While a 0.1% difference may not seem important, it is statistically significant. IHS Markit Chief Economist Chris Williamson reports that the rising costs have finally reached household spending.
As the Service Sector accounts for roughly 78% of the UK Economy, the decrease in spending is being felt by businesses nationwide. Restaurants, hotels and distributors took the largest hit falling by 0.5%. Retail trade was also inhibited as rising prices are continuing from the constant inflation. Overall industrial production was able to grow by 0.3% in the the first three months of 2017 thanks to the rise in motor vehicle output. On the other hand, agriculture has seen a slight decrease during this first period.
All of this decrease in sales is resulting from a lack in household spending. The rising inflation in the UK has reached a high level of 2.3% this March. During the fist period of the year, retail sales saw their largest fall in seven years. Businesses of all sizes are feeling the effects of the rising inflation. While the period from January-to-March typically sees lower sales, many companies fear this trend will continue into the following periods. After all, the inflation issue doesn’t seem to be curbing.