Published: Sun, February 25, 2018
Markets | By Erika Turner

Unemployment on the rise as wages continue to lag

Unemployment on the rise as wages continue to lag

The pound fell on Thursday after United Kingdom growth was revised lower by the Office for National Statistics in its second estimate of fourth-quarter gross domestic product (GDP).

City analysts had anticipated no change in the estimate.

There was also a downward revision to services sector output but the ONS says didn't impact on the headline GDP number.

There was also a better-than-expected rise in wages, although it still trails behind inflation, which stood at 3 percent in December, 2017.

GDP per head, which strips out the effects of a rising population, grew by 0.2 per cent in the fourth quarter, meaning it is only three per cent above the peak hit before the financial crisis.

The statistics body said that household spending grew by 1.8% previous year, also the slowest annual rate since 2012. The 1.6 per cent full-year growth was the slowest since 2011.

Total UK GDP is nominally divided between more people as the population grows.

Quarterly figures from the ONS showed the number of European Union nationals working in Britain rose by an annual 4.5 percent over the fourth quarter, the smallest increase since the third quarter of 2013.

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UK-wide, the quarterly increase in unemployment was 0.1 per cent.

The ONS also reported that business investment was flat in the final quarter of past year, despite City expectations of an 0.5 per cent increase. Businesses, too, have taken a more cautious approach on investment as they seek clarity over the post-Brexit economic landscape.

The BoE warned in February that if the inflation outlook evolves in line with its latest set of forecasts over the coming months then it could raise interest rates at a faster pace than it had previously led markets to belief.

Sterling remained under pressure following the update, slipping 0.2% against the United States dollar at 1.38.

"This factor continued to dampen consumer spending growth in the second half of 2017, but was offset by a stronger world economy, which boosted United Kingdom exports in areas like manufacturing and financial and business services".

The Bank of England can not allow itself to raise rates too soon for fear of sabotaging Britain's already sputtering economic growth.

UNEMPLOYMENT worsened and employment declined in Scotland in the last quarter, widening the gap with the rest of the United Kingdom, according to the latest official figures.

The downgrade reduced overall 2017 growth to 1.7 percent, its lowest since 2012, and confirmed that Britain is one of the slowest-growing Group of Seven economies.

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