UK growth revised upwards at end of year after manufacturing boost, but weaker first quarter drags on 2016 overall
The UK economy grew faster than previously thought in the last three months of 2016, with the manufacturing sector delivering a late boost to growth after a weaker first quarter.
Growth for the year was revised down to 1.8 per cent from two per cent after a slower performance in the first three months of 2016 than was previously reported, according to the Office for National Statistics (ONS).
However, growth accelerated at the end of the year with GDP rising by 0.7 per cent in the final quarter, after a preliminary estimate of 0.6 per cent last month.
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The ONS reports preliminary estimates of GDP, which are then subject to revision as more data is collected.
The updated figures pointed to a mixed picture for economists: the economy accelerated at the end of the year, but there was weakness in business investment and signs of a slowdown in consumer spending
Yael Selfin, chief economist at KPMG, pointed to the 4.1 per cent rise in exports during the final quarter as "really good news". Exports have been boosted by the fall in the value of the pound, of around 16 per cent, since the EU referendum.
With inflation set to dent consumer spending and the imminent triggering of Article 50 to begin the process of leaving the EU, a bumpy road lies ahead of the UK economy. However, the strength of spending driven by consumers in the aftermath of the EU referendum has put the economy on a firmer footing.
"If anything it's going into the uncertainty period stronger than before," said Selfin.
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Shilen Shah, bond strategist at Investec Wealth & Investment, said it provided "confirmation that strong consumer spending supported output at the end of the year."
"Looking forward, a slow-down in consumer spending is likely in 2017, as higher inflation hits consumers in the wallet. A slowdown in GDP growth in 2017 therefore currently looks inevitable."
Although a better than expected performance from the manufacturing sector was responsible for the upgrade in growth in the final quarter, the UK's dominant services sector delivered the lion's share. Services account for almost 80 per cent of the UK economy.
Darren Morgan, ONS head of GDP, said the economy's stronger growth at the end of 2016 was "mainly due to a stronger performance from manufacturing".
He added: “Overall, the dominant services sector continued to grow steadily, due in part to continued growth in consumer spending, although retail showed some signs of weakness in the last couple of months of 2016, which has continued into January 2017.”
Meanwhile business investment decreased by 1.5 per cent between 2015 and 2016, a fall of £2.7bn, the ONS said, after a one per cent fall in investment during the last quarter.