Britain’s economy failed to build much momentum over the past three months after almost stalling at the start of the year, reducing an already slim chance that the Bank of England will soon reverse last year’s emergency interest rate cut.
Economic output grew by 0.3% on the quarter, edging up from a sluggish rate of 0.2% in the first quarter, as a booming film industry and bright spots elsewhere in the services sector were largely offset by contractions in manufacturing and construction.
The figure was the weakest first half to any year since 2012.
Chancellor Philip Hammond said the economy was “steady” and that more certainty about how Britain will leave the EU in less than two years’ time would help spur economic growth. Sterling edged lower against the euro and the dollar after the data was released.
“To me, this is the final nail in the coffin for an August rate hike,” said Alan Clarke, head of European fixed income strategy at Scotiabank.
Underlining the consumer slowdown, separate figures from trade body UK Finance showed British banks approved the fewest mortgages for house purchase since September 2016 last month, though the total sum lent was the highest since March 2016.
Britain’s economy grew 1.8% in 2016, among the fastest of the world’s seven largest major advanced economies and defying widespread predictions of recession after the Brexit vote. But the Brexit vote in June 2016 did lead to a big fall in the value of sterling, which has pushed up inflation.
“The economy has experienced a notable slowdown in the first half of this year,” the UK’s ONS statistician Darren Morgan said.
The services industry was the only driver of economic growth in the second quarter, helped by retailers, hotels and restaurants, as well as Britain’s fast-growing film industry.
The ONS said motion picture activities had grown by 72% since 2014, probably boosted by tax credits introduced by former chancellor George Osborne.
The release of blockbuster films in the second quarter also helped. Films entering production in Britain recently include M:I6 — Mission Impossible starring Tom Cruise, Peterloo directed by Mike Leigh and Yardie, the British Film Institute said.
Guardians of the Galaxy 2, Wonder Woman and Fast and Furious 8 also generated large boxoffice revenues over the quarter.
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