UK economy slows in first quarter

The UK's GDP slowed to 0.4 per cent in the first quarter of 2008, compared with 0.6 per cent in the previous quarter.

According to figures from the Office for National Statistics (ONS), both the production and service industries saw a slowdown in comparison to the fourth quarter of 2007.

Total production output decreased by 0.1 per cent in the first three months of the year, compared with 0.2 per cent growth in the fourth quarter, mostly due to a fall in mining and quarrying production.

Manufacturing growth strengthened, while electricity, gas and water fell by 1.2 per cent compared with growth of 2.8 per cent in the previous quarter.

The business services and finance sector slowed overall services growth to 0.6 per cent compared to 0.7 per cent last quarter.

Construction rose by 0.5 per cent, compared with a rise of 1.1 per cent in the previous quarter.

The economic slowdown is also reflected in a lower demand for manufactured goods, reflected in a report from the Confederation of British Industry (CBI) yesterday.

But the report also found that manufacturers, hit by higher costs, were putting their prices up.

Global Insight economist Howard Archer said: "The marked slowdown in GDP growth in the first quarter puts pressure on the Bank of England to cut interest rates again sooner rather than later, despite current significant inflation risks.

"We expect the Bank of England to trim interest rates by a further 25 basis points to 4.75 per cent in June, and would not rule out a move as early as May if credit conditions remain tight. Further out, we expect interest rates to fall to four per cent by early 2009."