UK economic growth fell by half in the first quarter of 2008.
New figures from the Office for National Statistics (ONS) show GDP growth stood at 0.3 per cent in the first three months of 2008.
This was down 0.1 per cent from estimates and down from 0.6 per cent growth in the last quarter of 2007.
Annual GDP growth now stands at 2.3 per cent.
Output from production industries fell 0.2 per cent, while manufacturing and services industries both reported growth.
The data also show household expenditure was up 1.1 per cent over the quarter and rose three per cent over the year – as families face high food and fuel prices.
Pay deals are now 4.6 per cent higher than a year ago – placing further pressure on inflation – despite government calls for wage restraint in the private sector.
Howard Archer, chief UK economist at Global Insight, said: “There is undeniably a very real, and growing, danger that the economy could suffer a mild recession.
“We currently forecast GDP growth to moderate from three per cent in 2007 to 1.6 per cent in 2008 and 1.2 per cent in 2007, as seriously pressurized consumers increasingly tighten their belts, business investment is scaled back substantially and exports are limited by slower growth in key markets despite the support coming from a weaker pound.”
He went on to explain the slowing economy should be enough to bring down inflation and stop Bank of England from increasing interest rates.
“Any cut in interest rates now looks unlikely until 2009, unless the economy really falls off a cliff over the coming months,” Mr Archer explained.
“With consumer price inflation set to exceed four per cent later this year, inflation expectations elevated and rising, workers increasingly pushing for higher pay as their purchasing power is squeezed and firms currently keenly looking to raise their prices to support margins in the face of elevated input costs, the Bank of England will tread extremely carefully on the interest rate path.”
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