The first estimate of UK Q1 16 GDP growth showed that growth slowed to 0.4%q/q in Q1 16 from 0.6% q/q in Q4 15. This was in line with consensus but higher than our expectation of a 0.3% q/q print. If we include the second decimal, this was the slowest growth pace since Q4 12 when GDP growth was negative (we had another +0.4% q/q print in Q3 15). The services sector (78.6% of GDP) was the only positive contributor to growth as both industrial production and construction fell. In our view, today's release in combination with the labour market report for February supports our view that the UK economy is slowing ahead of the UK's EU referendum. We expect GDP growth to remain subdued ahead of the EU referendum.
Most opinion polls released recently have the 'remain' camp ahead but still suggest that it is a close race. The probability of a 'Brexit' is 28% according to the latest information from Betfair.
Slower growth, falling employment, still low inflation and subdued wage inflation mean that the Bank of England is unlikely to do anything ahead of the UK's EU in/out referendum.
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