The UK economy grew 0.5 per cent in the first full quarter following the country’s vote to leave the European Union, down from 0.7 per cent seen in Q2, but above the 0.3 per cent expected.
Services led growth and the figures have been described as “lopsided”.
Consumer-focussed industries in particular exhibited strong growth with retail output growing 1.8 per cent, accommodation and restaurants up 1.7 per cent.
The film and TV industry, which grew at 16.4 per cent, added 0.1 percentage point to total GDP growth, despite only accounting for 0.6 per cent of the UK economy.
However, Fidelity International global economist Anna Stupnytska warns that consumers are likely to take a hit in 2017 with “lower real income growth on the back on higher inflation and a potentially weaker labour market”.
Stupnytska says the government could limit the short to medium-term Brexit fallout by introducing fiscal measures such as infrastructure spending and tax cuts.
While the services sector increased 0.8 per cent in the latest period, output decreased in all other areas with construction decreasing 1.4 per cent, agriculture decreasing 0.7 per cent and production decreasing 0.4 per cent.
Within production manufacturing decreased 1 per cent.
IHS Markit chief economist Howard Archer describes the GDP figures as “lopsided”.
Archer predicts total GDP for 2016 will be 2 per cent, but will slow to 1 per cent in 2017.
“While we expect the economy to struggle appreciably in 2017 we expect it to avoid recession,” Archer says.
Businesses will likely be very cautious over investment and employment, Archer says, and this will heighten as the Government triggers Article 50 in Q1 next year and Brexit negotiations come to the forefront.
Alongside consumers, businesses will take a hit from the weak pound as imported oil, commodities, and components costs rise.
Archer warned that “lacklustre” growth in the eurozone could constrain the impact of a weaker pound on exports.
The ONS says on a trade weighted business the pound had fallen 14.4 per cent in September compared with a year earlier.