Growth suffers weather-related dip

The National Accounts showed that the economy barely slowed at all in 2017. Annual growth, revised up from 1.7% to 1.8%, was only marginally lower than 2016’s 1.9% outturn. Since then, however, the heavy snowfall at the start of March appears to have knocked the services and construction sectors in the first quarter of this year. Indeed, the Markit/CIPS all-sector PMI points to a slowdown in overall GDP growth from 0.4% in Q4 to around 0.3%. Nonetheless, we doubt a weaker Q1 figure will set the tone for the rest of 2018. Indeed, the bad weather is likely to have simply shifted a bit of activity from the end of Q1 into the second quarter. And in any case, with sustained rises in real pay now in prospect, there is scope for growth to re-gain some momentum. Overall, then, despite the weather-related weakness, we still think that the Monetary Policy Committee will press ahead and raise interest rates again in May.