Mixed prospects for UK GDP despite 0.7% Q4 rise

UK gross domestic product grew by 0.7 per cent in Q4 2016 but the outlook for the year ahead looks less buoyant, according to experts.

Royal London economist Ian Kernohan is seeing signs that uncertainty around Brexit was starting to hit the corporate sector.

He says: “Far from slowing down after the vote to leave the EU, GDP growth actually picked up in the second half of the year.

“However, there were some signs that Brexit uncertainty is starting to have some impact on the corporate sector, with business investment down during the last three months, combined with slower growth in consumer spending.”

He added that sterling weakness is helping to rebalance the economy, with a strong contribution from net trade in the final quarter last year.

The second estimate from the ONS, released this morning, shows the joint-fastest quarterly growth rate since 2014.

While the quarter saw a 1.2 per cent rise in consumer spending and a 1.8 per cent year-on-year growth in the services sector, The Share Centre economics commentator Michael Baxter is warning of mixed fortunes for 2017.

He says CBI and recent purchasing managers’ surveys indicate a rapidly improving manufacturing sector off the back of a weak pound yet several others sectors are showing weakness.

He adds: “Retail sales fell in January, the housing market got off to a lacklustre start in 2017, and rising inflation is beginning to exert a toll. Very soon, we will probably see inflation exceed wage increases, meaning that growth in real wages will go negative for the first time since 2014. This will hit consumer spending.  Hope for growth to continue at a reasonable pace rests on the shoulders of manufacturing, let’s hope they are broad enough.”