Royal Bank of Scotland Group Plc pushed back its forecast for the first interest-rate increase by the Bank of England to August from May, citing a “lacklustre rebound” in construction activity in February.
RBS economist Ross Walker cut his forecast for first-quarter economic growth to 0.4 percent from 0.8 percent, according to a note to clients today.
The Office for National Statistics said today that construction output rose 8.6 percent in February from the previous month, when it dropped 6.8 percent. Output was little changed on the year. The data suggests the building industry posted a seasonally-adjusted decline of about 5 percent in the first quarter from a year earlier, which lowers RBS’s gross-domestic-product estimate for the period, Walker said.
“The underlying data appear significantly weaker than previously assumed,” he said. “It is extremely difficult” to see what could increase the economic growth estimate back to the 0.8 percent rate “we believe is required for the Monetary Policy Committee to vote for a rate hike in May,” Walker said.