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  1. ITV Report

Slowdown in UK economy worse than expected as spending falls

Sliding retail sales and a jump in living costs have seen the UK economy endure a worse-than-expected slowdown in 2017.

The growth of the economy - judged by gross domestic product (GDP) - slowed to 0.3% during the first three months of the year, its slowest rate in a year.

Economists had anticipated a decline from 0.7% in the final quarter of 2016 but expected GDP to be 0.4% in the 2017's first quarter.

ITV News Economics Editor Noreena Hertz said the figures make gloomy reading for Downing Street.

Labour's shadow chancellor John McDonnell attacked the government, saying the lower-than-expected GDP figures "reveal the threat to living standards under the Tories".

"Growth for the first three months of 2017 was only half of what was expected," Mr McDonnell said.

"It comes on the back of new forecasts last week from leading independent forecasters showing growth and earnings expectations slashed and inflation revised up."

Shadow chancellor John McDonnell blamed the government for the slow in growth. Credit: PA

He added: "There is no hiding from the truth. The Tories’ economic plan has undermined the UK economy and is a threat to working people’s living standards."

The Office for National Statistics (ONS), which announced the figures, said the slower growth was "mainly due" to a decline in growth within Britain's powerhouse services sector, which accounts for 78% of the UK economy.

The sector's expansion slowed from 0.8% at the end of 2016 to 0.3% between January and March.

Household spending has curbed in recent months. Credit: PA

The main drag came from the hotels, restaurants and distributions sector, which fell by 0.5%.

Rising prices and lower spending also contributed to falls in "several important consumer-focused industries, such as retail sales and accommodation", the ONS said.

The squeeze on household spending power has been compounded by dismal retail sales, which recorded their biggest fall for seven years in the three months to March.

The graphic shows the changing GDP (£ billions) and quarter-on-quarter growths from 2007 to 2017. Credit: Office for National Statistics

Consumers have been feeling the pinch since the beginning of 2017, with inflation sitting at its joint highest level for more than three years at 2.3% in March.

Announcing the latest GDP figure, the ONS noted production, construction and agriculture all grew during the first quarter period.

The ONS said the overall first quarter figure marked the slowest rate of growth since the first quarter of 2016.