Tuesday 12 March 2019 10:04 am

UK economy rebounds in January but longer term growth remains weak

Reporter covering economics and markets. You can send me stories or get in touch at harry.robertson@cityam.com

Reporter covering economics and markets. You can send me stories or get in touch at harry.robertson@cityam.com

The UK economy grew faster than expected in January, with GDP expanding 0.5 per cent, newly released figures from the Office for National Statistics (ONS) show.

This marked an improvement on December 2018, when GDP shrank by 0.4 per cent.

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January’s figure was boosted by growth in the construction sector of 2.8 per cent, and 0.8 per cent in manufacturing, which had both contracted in December 2018.

However, in the three months to January 2019 the economy grew by 0.2 per cent, which should be used as an “indicator of the longer-term trend of the economy”, the ONS said.

Over this period, the services sector was the only positive contributor to GDP growth, increasing by 0.5 per cent.

The production and construction sectors had negative contributions to GDP growth over the three months to January, contracting by 0.8 per cent and 0.6 per cent respectively, despite growing in January.

Head of GDP at the ONS Rob Kent-Smith said: “Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services.”

“This sluggish growth came despite the economy bouncing back from a weak December”, he added.

Chief economist at PwC John Hawksworth said: “There was some good news on the economy this morning ahead of the Brexit vote and Spring Statement, as monthly GDP bounced back more strongly than expected in January.”

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"The volatility of the monthly data for December and January reinforces the importance of focusing most attention on the rolling three month average GDP growth rate”, he said. “The big picture therefore remains one of continued sluggish but positive growth in the UK economy, with business investment held back by ongoing uncertainty over Brexit."