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UK January Growth Beats Forecast, But Pace Remains Weak

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The UK economy expanded at a faster-than-expected pace in January, supported by growth in all main sectors such as manufacturing, services and constructions, but the pace of growth was lackluster amid the lingering Brexit uncertainty.

Gross domestic product grew 0.5 percent month-on-month in January after a 0.40 percent decline in December, preliminary figures from the Office for National Statistics showed on Tuesday. Economists had expected a 0.20 percent increase.

In November, GDP grew 0.2 percent monthly.

On a 3-month-on-3-month basis, GDP rose 0.20 percent in January, which was in line with economists' expectations.

"Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services," ONS Head of GDP Rob Kent-Smith said.

"This sluggish growth came despite the economy bouncing back from a weak December."

Industrial production rose 0.6 percent from December, when it fell 0.5 percent. Economists were looking for a 0.20 percent growth.

Manufacturing output grew 0.8 percent after a 0.7 percent decline in December. Economists had expected a 0.20 percent increase. The latest rise was the first since June 2018, and was mainly due to a surge in pharmaceuticals output.

Services output grew 0.3 percent after a 0.2 percent fall in the previous month. Economists had expected a 0.20 percent gain.

Construction rose 2.8 percent, reversing a similar size fall in December. Economists had forecast a 0.80 percent increase.

Separately, the ONS reported that the visible trade deficit in January widened to GBP 13.08 billion from GBP 10.89 billion a year ago. In December, the shortfall was GBP 12.68 billion. Economists had forecast a GBP 12.2 billion deficit.

"With the economy seemingly soft in the first quarter, we believe that the Bank of England is unlikely to hike interest rates before November," the EY ITEM Club said.

"This forecast assumes that the UK ultimately leaves the EU with a "deal" and that there is some pick-up in UK growth thereafter as uncertainties ease."

Even then, there is a genuine chance now that the Bank of England will sit tight on interest rates throughout 2019 - especially if Brexit is delayed, the think tank added.

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