Disappointing end to 2018 for UK economy could be confirmed this week

A disappointing end to 2018 for the UK economy could be confirmed by official GDP figures later this week, analysts have warned.

Last week the closely-followed IHS Markit/ CIPS Purchasing Managers’ Index (PMI) revealed a three-month low in UK construction sector activity in December and a 29-month low in job creation in the services sector.

But the manufacturing sector posted a near-record increase in stock holdings in December.

Economists predicted a 0.1 per cent rise in GDP for November, when the Office for National Statistics release figures on Friday – it would leave the UK on track for the lowest GDP rise since 2009.

“We think that a repeat of the previous month’s modest 0.1% expansion in the size of the economy is likely,” Martin Beck, analyst at Oxford Economics, said.

Beck added that while a composite measure of PMIs in November dropped to the lowest level since July 2016, it would be offset by a strong performance in the retail sector and upbeat industrial data for the month.

The research firm also expected GDP to rise 0.3 per cent in the fourth quarter to leave 1.4 annual growth – the lowest since 2009.

Daiwa Capital Markets also said last week’s PMI data implied “minimal growth” in the final quarter of the year and predicted GDP growth of 0.1 per cent in November, unchanged from October, but on track for a “sharp slowdown” from the 0.6 per cent growth in the third quarter.

The investment bank’s analysts also expected manufacturing and construction output to be stronger for November than the previous month but a slowdown in services activity.

They said: “The manufacturing and construction PMIs, released the past couple of days, provided a mixed picture of business sentiment at the end of the year.

On the whole, however, we took a downbeat message from them, not least as the boost to manufacturing activity mainly reflected stock building ahead of a possible no-deal Brexit.”