The UK economy [May 2001]

The UK economy is starting to show signs of slowing down. The preliminary estimate of GDP quarter on quarter growth in 2001 Q l at 0.3 percent was the lowest since 1998 Q4. The year on year growth rate fell to 2.5 percent in 2001 Q l , compared with 2.6 percent the previous quarter and 3.0 percent for 2000 as a whole. The output of production industries has fallen in February and March, partly due to the continuing weakness of mining, oil and quarrying output and partly due to a fall in manufacturing output in March. Of particular concern is the 3.3 percent fall quarter on quarter in the output of electronics and optical equipment. Since our last Commentary the Bank of England has cut interest rates twice by 0.25 percentage points in April and May. On both occasions the Bank cited concerns about the global economy and the need to meet the inflation target in the medium term. Foot and mouth disease has had a major impact upon some parts of the livestock industry since February. The direct impact upon the economy as a whole is likely to be relatively modest, although there are concerns about reductions in spending by tourists