Prospects for the UK economy

Abstract

The economy is slowing as expected. NIESR's estimate of monthly GDP suggests that the rate of economic growth slowed from 0.3 per cent in the first quarter of this year to 0.2 per cent in the second quarter of this year (figure 1), the weakest rate of growth since the second quarter of 2001. Recent data on the state of the economy is mixed. Retail sales volume growth surged to 1.8 per cent per quarter in the three months to May 2008, up from a rate of growth of 1.2 per cent in the preceding three months. The index of production, however, recorded a fall of 0.5 per cent in the three months to May 2008. The index of services suggests services output growth has continued to be relatively subdued. The quarterly rate of growth in the three months to April was 0.3 per cent, half the rate of growth in the final quarter of 2007. While the retail sales data are not yet consistent with a consumer led slowdown, the decline of hotel and restaurant output in the three months to April suggests that other components of consumer spending are slowing.