The ONS said sectors such as retail sales and accommodation slowed as prices increased more than spending.
Hotels, restaurants and distributions contracted by 0.5% as consumers’ purchasing power fell in the face of higher prices.
Fidelity International global economist Anna Stupnytska said even though services growth was lower than expected, pushing down the overall GDP figure, “investment intentions look to have stabilised”.
“The benefits of the weaker currency have slowly started feeding through to external sector,” she said.
“This suggests that consumer weakness could be offset, at least partially, by better investment and trade numbers. While Q1 GDP will be in sharp focus today, the numbers are highly volatile and are subject to heavy revisions.”
Dean Turner, economist at UBS Wealth Management, said:
“Looking ahead, we expect that pressure on real household incomes will keep growth subdued.
“Nevertheless, the recent bounce in sterling on the back of Theresa May’s election announcement appears justified in light of today’s figures, as although the economy is slowing, it remains relatively resilient ahead of Brexit negotiations.
“Attention will now turn to the Bank of England’s Inflation Report a fortnight from now, a modest downgrade to their growth forecasts is possible, but we don’t think that today’s release will have any implications for monetary policy for the foreseeable future.”
