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UK economy slows in Q1, more reliant on services

[LONDON] Britain's economy slowed in the first three months of the year and again leaned on the services sector for growth, according to official data on Wednesday.

First-quarter gross domestic product grew by 0.4 per cent, down from 0.6 per cent in the three months to December 2015 and in line with economists' forecasts of a 0.4 per cent expansion, the Office for National Statistics said.

The ONS said it had no evidence for or against the slowdown being linked to uncertainty around Britain's June 23 referendum on European Union membership, but business surveys suggest it is taking a toll on activity and investment.

The preliminary reading of gross domestic product does not include measures like investment and trade that would more readily reflect Brexit-related uncertainty, or a slowing global economy.

Output in the three months to December was 2.1 per cent higher than a year earlier, matching the fourth quarter's growth rate that was also the weakest since the third quarter of 2013 but it was still slightly stronger than expected by economists.

The Bank of England has said that interpreting economic data in the run-up to the referendum is likely to be tricky but it has pointed to signs that uncertainty around the Brexit vote is weighing on business investment.

Growth in the first quarter was driven solely by the services sector, which expanded 0.6 per cent compared with the fourth quarter. By contrast, industrial and construction output declined 0.4 per cent and 0.9 per cent respectively.

Manufacturing and construction output suffered the steepest drops in annual terms since early 2013.

The soft outlook for the world economy, combined with a slowdown in British wage growth, has prompted economists to push back their bets on when the Bank of England will raise rates into next year.

Official data earlier this month showed industrial output shrank at the fastest rate in more than three years in the three months to February and the trade deficit ballooned to its widest in eight years.

While consumer demand has remained broadly solid, retail sales dropped at the joint-fastest rate in March since January 2014, adding to signs of a slowdown.

REUTERS