Falling investment, weak household spending drag on UK economy in first quarter

LONDON (Reuters) - Falling business investment and the weakest household spending growth in more than three years marked a bad start to 2018 for Britain's economy, as official data on Friday confirmed it barely grew.

Despite the Bank of England's doubts, Britain's Office for National Statistics (ONS) stuck to its view that bad weather alone could not explain why the economy grew just 0.1 percent between January and March, as expected in a Reuters poll of economists.

Instead, the ONS said it saw a longer-term pattern of slowing growth.

Business investment dropped 0.2 percent quarter-on-quarter in the first three months of the year, its worst performance since mid-2015, the Office for National Statistics (ONS) said.

Net trade failed to contribute to growth and household spending edged up only 0.2 percent on the quarter, the weakest increase since the fourth quarter of 2014.

"Overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing industries," ONS statistician Rob Kent-Smith said.

"While there was some evidence of the poor weather hitting construction and high street shopping, this was offset to an extent by increased energy supply and online sales."

BoE Governor Mark Carney has said business investment in Britain would normally be growing much more strongly, given the recovery in the world economy, and was being held back by uncertainty about Brexit.

Britain's economic growth rate was overtaken by other economies last year as a rise in inflation caused by the pound's post-Brexit vote plunge in 2016 squeezed consumers' budgets.

Britain's economy stood 1.2 percent larger in the first quarter than its level a year ago.

Only Japan's economy has grown more slowly over the same period among the six Group of Seven rich countries to have reported first-quarter growth data.

Earlier this month the BoE cast doubt on the ONS' view that the economy's weak start to the year was not mainly a result of heavy snow.

The central bank said it expected quarterly growth for the first quarter would eventually be revised up to 0.3 percent.

It has pencilled in quarterly growth of 0.4 percent for the current April to June period.

Still, after the weak first-quarter figures from the ONS, the BoE chopped its forecast for annual average growth in 2018 to 1.4 percent from 1.8 percent previously -- in line with the consensus of economists polled by Reuters.

(Reporting by Andy Bruce and William Schomberg)