Rate rise expectation dampened as GDP growth falls to five-year low

The ONS says UK GDP growth is now at its slowest since Q4 2012, with construction being the largest downward pull on GDP, falling by 3.3%.

It added that the the snow over Q1 only had a small impact on construction and retail sales, with "very little impact observed in other areas of the economy".

Jacob Deppe, head of trading at Infinox, commented: “That only a small amount of the fall in first quarter GDP can be blamed on the 'Beast from the East' will be the big takeaway from today’s data.

“If, as the Office for National Statistics itself said, the impact of snow on economic activity was small, the chances of a second quarter bounce will also be lower.

“That the downturn in economic activity was also broad-based will be a concern for Bank of England policymakers. An interest rate hike in May now looks very much like a dead duck.

“In fact, given Bank of England Governor, Mark Carney, warned over weak retail sales and softer levels of business investment just last week, until, or unless, the economic picture improves it seems unlikely that interest rates will go anywhere.

“Wth wages rising by 2.8% in February and Consumer Price Inflation falling to 2.5% in March, the MPC is under little pressure to hike rates until it has more data, particularly if inflation looks to be heading towards its 2% target.

“If there is an interest rate hike at all this year it now seems unlikley it will come before October.”

Nancy Curtin, chief investment officer at Close Brothers Asset Management, added: “The economy wasn’t expected to pick up the pace in the first quarter, but the scale of the slowdown will certainly raise investors’ eyebrows.

"Growth is now not only slower than its global counterparts – it is its slowest since Q4 2012.There are some mitigating factors at play, however. The Beast from the East caused sharp dips in output in several sectors, severely impacting construction and retail which are key parts of the UK economy.

“That said, the real concern for Mark Carney and the MPC will be how much of this slowdown is down to underlying and structural issues with the economy.

"Brexit related uncertainty is still a key factor and productivity needs to be an absolute point of focus for the economy to catch up to the global synchronised recovery we’re experiencing elsewhere.

"Britain has endured the worst decade for productivity growth since the 18th century, and the failure to get out of this slump is a real worry. Successfully increasing productivity will improve wage growth and spending, as well as business investment, and would be the catalyst to competitive growth. In the meantime, such slow economic growth will reduce the chances of Carney raising rates in the near-term future.”