U.K. economic growth slowed more sharply than expected in the first three months of the year, according to a more detailed estimate from the country's statistics office, as consumers trimmed discretionary spending amid searing inflation and increased political uncertainty linked to the country's decision to leave the European Union last June.
The U.K. economy, the world's fifth-largest, grew at a 0.2% clip in the three months ending in March, the Office for National Statistics said in its Thursday, down from the so-called flash estimate of 0.3% published on April 28 and the 0.7% pace recorded in the final three months of last year. The ONS said the country's service sector led the slowdown with growth of 0.3% compared to 0.8% in the final three months of last year.
"Consumer facing industries such as retail and accommodation fell and household spending slowed," the ONS said. "This was partly due to rising prices. Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly."
The pound slipped modestly to 1.2980 against the U.S dollar immediately following the release, but quickly recovered to trade at 1.2993 by 09:35 BST.
Earlier this month, the Bank of England warned that slowing wage growth and higher consumer prices could impact sentiment and erode growth potential, but nonetheless noted that uncertainty related to the country's pending exit from the European Union had somewhat abated.
"One underlying factor explaining stronger-than-expected demand growth may be that uncertainty has been less of a drag on activity than anticipated, particularly for consumer spending," the Bank of England. "Greater uncertainty can deter households from making some major purchases and reduce companies' appetite for investment. Some of the weakness in investment does appear to reflect a drag from uncertainty, but a smaller one than had been anticipated in August."
U.K. inflation accelerated to its highest level in four years last month, according to the latest ONS reading with April inflation speeding to 2.7% while core CPI, which strips out volatile prices for food and energy, accelerated to 2.4%, the highest since March 2013.