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UK economy performs better than expected in Q4 2017 – ONS

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  • 26/01/2018
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UK economy performs better than expected in Q4 2017 – ONS
UK gross domestic product (GDP) increased by an estimated 0.5% in Q4 2017 against an expected 0.4% rise, according to the Office for National Statistics (ONS).

 

Overall GDP growth in 2017 was estimated to have increased by 1.8%, just below the 1.9% seen in 2016.

This is the slowest rate of GDP growth since 2012, said the ONS.

The data, which covered the October to December period in 2017, showed that production industries grew by 0.6%. But construction contracted for the third successive quarter, falling 1%.

However, annual growth in construction remained at a strong 5.1% owing to a strong start in 2017.

The services sector increased by 0.6% compared to Q3, driven by business services and finance. Although the ONS said that the longer-trend continues to show a weakening in services growth.

 

Rate hikes

Richard Stone, chief executive of The Share Centre, argued that the ONS results also means a higher chance of a base rate rise.

“The initial estimate of GDP for Q4 2017 shows the UK economy performing slightly better than expected,” said Stone.

He continued: “The governor of the Bank of England, Mark Carney, this morning observed that the UK economy has suffered an impact to growth from Brexit and the consequent uncertainty.

“However, the UK economy may grow more strongly than expected in 2018 as clarity increases over the UK’s exit from the EU.”

While the market already expects a rate hike in August, Stone said these expectations may need to be “adjusted” owing to potentially stronger-than-expected performance from the UK economy, peaking inflation, rising employment, and earnings growth.

“The Bank of England may well look to move rates higher more quickly with an initial rise coming earlier than August, and the potential for a second rise later in the year,” said Stone.

“Overall today’s figures are good news, and if that good news keeps flowing then interest rates will inevitably rise a little quicker than currently anticipated,” he added.

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