First estimates of GDP growth released this morning by the ONS show that the economy grew by 0.5% in Q4 2014, the slowest rate of quarterly GDP growth in a year (it was 0.7% in Q3 and 0.8% in Q2).

UK GDP growthThe slowdown can be attributed to weakness in the construction and industrial production sectors.

Output decreased by 1.8% in the construction sector, the first decline since Q1 2013.

There was also a 0.1% fall in output in the production industries, with mining and quarrying (mostly oil and gas production) down by 0.6% and energy supply decreasing by 2.8% (mostly due to a decrease in the manufacture of gas). The manufacturing sector eked out growth of 0.1%.

The services sector, making up over three-quarters of the economy, continued to grow strongly, up by 0.8% on the quarter – the same as in the previous quarter. There was particularly robust growth in the ‘distribution, hotels and restaurant sector’ (1.3%) and ‘transport, storage and communication’ (1.1%).

Growth by sector

These figures are the first attempt by the ONS to measure GDP in the most recent quarter (which only ended less than four weeks ago), and are based on 44% of the data that will eventually be used for the final estimate. This estimate is therefore subject to revision in forthcoming releases (the next will be at the end of February).

Annual GDP growth for the whole of 2014 was 2.6%, the highest since 2007 (also 2.6%). This is also likely to be the fastest growth for 2014 seen in any of the G7 countries, although most other countries have not yet published data for the full year.

Despite the slowdown at the end of 2014, most economic forecasters expect growth to remain relatively healthy in 2015 underpinned by improving real household incomes, due to low inflation and earnings growth. The IMF last week forecast GDP growth in the UK to be 2.7% in 2015.

Daniel Harari