Is this the start of an economic slowdown?

What do the Q1 results mean for UK business?

With just over a week to go before the general election, the Office for National Statistics (ONS) released the UK Q1 results on Tuesday, reporting just 0.3% of growth in the first quarter, compared to 0.6% in Q4 2014. It is the slowest growth recorded since the end of 2012.

These preliminary results caused a dip in sterling against the dollar, although it quickly bounced back to a two month high. Generally, sterling is still up against the dollar and euro, read why in our article here.

What does this mean, and why was it a surprise?

Few economists believe that sluggish growth figures indicate the beginning of an economic slowdown, and as we have eluded to in previous articles, we believe that these figures represent a blip as opposed to a trend, for the following reasons:

  1. The strength of sterling gives UK importers opportunities

    The sterling rose against the dollar and the euro in Q1, indicating confidence in the UK economy.

  2. Unemployment figures at a record low

    The number of jobless people is at a seven year low – this suggests that businesses are hiring and growing.

  3. Low oil prices

    Oil prices have remained at a record year lows around $50 a barrel for crude, which has provided huge opportunities for growth in the construction and manufacturing industry (although construction figures were slightly weaker than expected in Q1).

  4. Inflation numbers

    UK inflation numbers have remained at 0.0%, likely to be because of falling oil and mainstream prices (according to the ONS), resulting in boosted disposable incomes. Low inflation is good for UK businesses who are exporting as production costs remain low and constant.

Broken down, the largest contribution to the increase was in the services sector, which grew steadily by 0.5%. The fallers were the construction industry (by 1.6%), the production industry (by 0.1%) and agriculture (by 0.2%).

Summary
Article Name
Is this the start of an economic slowdown for trade?
Description
The ONS recently published growth figures, indicating the slowest growth since 2012. At Trade Finance Global, we think that this is a blip rather than a trend.
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