Finance

Shock as unemployment rises at fastest pace in five years

Shock as unemployment rises at fastest pace in five years

United Kingdom headline unemployment increased from 4.3% to 4.4% between October and December 2017.

Britain's GDP growth slowed to 0.4 per cent in the three months to December from a previous estimate of 0.5 per cent, Office for National Statistics said today after unexpectedly revising down its estimated output of the production industries.

Last month, the Bank of England raised its growth forecast for the United Kingdom economy to 1.8% this year, from its previous forecast of 1.6% made in November.

"Unemployment remains relatively low by historical standards and there are still 10,000 fewer people unemployed in Scotland than this time past year".

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 slowdown was mainly due to weakness in consumer-facing services, such as retailers, cafes and cinemas, the ONS said.

"This is demonstrated by our Budget investments of nearly £2.4bn in enterprise and skills and the most attractive package of non-domestic rates reliefs available anywhere in the United Kingdom, including the Small Business Bonus, worth £720m, and the UK's first nursery relief".

However, Samuel Tombs, Pantheon Macroeconomics chief United Kingdom economist, said: "This is not an economy that needs cooling with higher interest rates".

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

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

While Thursday's data will inevitably fill a great deal of column inches, it is unlikely to prove a game changer for the Bank of England and Pound Sterling in the months ahead, given that in November the Bank had forecast fourth quarter GDP of 0.4% and not 0.5%.

Food sales fell last month, but there was a rise in the number of products related to sport and leisure activities that were purchased, both via safe shopping online and on the high street. The gross fixed capital formation rose1.1% in the fourth quarter. Household spending grew by 1.8 percent in 2017, its lowest since 2012.

On net trade, the deficit widened by £2.5 billion to £12.2 billion quarter on quarter following a hefty jump in the cost of imported fuels.

Employability and training minister Jamie Hepburn said: "While unemployment and employment have improved over the year, the slight decrease in employment and increase in unemployment levels over the most recent quarter is disappointing - which is why we recognise the need for further investment in our economy and labour market".

'The UK economy is still estimated to have slowed markedly in the first half of 2017 as higher inflation - linked primarily to the weaker pound after the Brexit vote - dampened real household spending power'.


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