Bank of England adopting too benign a view on Brexit

The UK economy performed much better than expected in the second half of last year, in the aftermath of the referendum vote in favour of Brexit.

However, the effects of that vote would appear to be catching up with the economy in 2017. GDP growth slowed in the first quarter of 2017 to 0.3% from 0.7% in the final quarter of 2016. The breakdown of GDP shows the slowdown was primarily due to the services sector. It grew by 0.3%, compared to 0.8% in the previous quarter. The retail trade was the largest contributor to the slowdown in services. Meanwhile, output from production industries rose by 0.3%.

While expenditure-based GDP figures are not available yet for quarter one, other data suggest the volume of consumer spending slowed, or even possibly declined, in the quarter. Retail sales volumes fell by 1.4%, the first decline in over three years and their largest fall since the opening quarter of 2010.