Bad weather expected to knock economic growth to one-year low, says PwC
Preliminary estimates for first quarter GDP will be released on April 27.
Bad weather over the first quarter is likely to have knocked economic growth to its lowest level in a year, according to PwC.
The firm’s forecasts show that the so-called Beast from the East, which hit the UK with snowstorms earlier this year, could reduce UK gross domestic product (GDP) growth to between 0.2% and 0.3% for the first three months of 2018.
That would mark a drop from the 0.4% rise in economic output over the final months of 2017 and would be the lowest rate of growth since the start of last year, when GDP rose by 0.2% quarter-on-quarter.
The warning from PwC comes ahead of official data from the Office for National Statistics, which will release its preliminary first quarter GDP estimate next Friday, April 27.
PwC’s forecast is similar to projections by the National Institute of Economic and Social Research (NIESR) think tank, having predicted a slowdown to around 0.2%.
PwC’s chief economist John Hawksworth said: “The last time we had such significant snowfalls, in December 2010, there was a marked dip in quarterly UK GDP growth.
How do you think the UK economy will fare over the coming years? Watch this short video to hear our projections and explore the full #UKEconomicOutlook here: https://t.co/aibPa3e1Dk pic.twitter.com/4OTbCjEtUU— PwC UK (@PwC_UK) March 20, 2018
“Construction output fell sharply and retail and leisure spending was hit in the run up to Christmas. This was only partly offset by a sharp rise in energy consumption for heating.
“This time around, the adverse effects of the snow should be less marked.
“Manufacturing seems to have been less affected and energy use will have increased.”
Official figures last week showed that manufacturing activity declined unexpectedly in February – with factory output dropping 0.2% month-on-month – while the construction sector suffered a 1.6% drop, having fallen by 3.1% in January, according to the ONS.
The statistics agency said it was difficult to quantify the impact of bad weather on the industry, but that poor conditions could have been responsible for the decline.
Retail sales also suffered in March as shoppers avoided the snow-covered high streets.
Sales slumped by 10.1%, according to figures from accountancy firm BDO.
However, PwC said that any bad weather effects “should only be temporary” and that output was likely to bounce back in the second quarter.
“We have not changed our main scenario of 1.5% GDP growth for 2018 as a whole,” Mr Hawksworth said.
“For monetary policy decisions and business planning purposes, we would therefore recommend focusing on the underlying picture of continued moderate but steady UK growth.”