UK GDP Growth Beats Expectations In Q4


The UK economy advanced 0.6 percent on quarter in the three months to December of 2016, the same pace as in the previous period and better than market expectations of a 0.5 percent expansion, preliminary estimates showed. Services industries were the main drivers of growth, with a strong contribution from retail sales and travel agency services. Meanwhile, construction recovered slightly and production industries showed no growth, as a sharp contraction in mining and oil production offset a rebound in manufacturing and utilities.

The services aggregate grew 0.8 percent and was the sole contributor to the quarter-on-quarter percentage change in GDP to 2 decimal places. Production (no growth), construction (+0.1 percent) and agriculture (+0.4 percent) each contributed 0.00 percentage points to the headline figure.

Within the services aggregate, the distribution, hotels and restaurants industry increased by 1.7 percent (+1.7 percent in Q3) and contributed 0.24 percentage points to growth. Retail trade, wholesale trade and the trade and repair of motor vehicles were all strong performers. The business services and finance industries also performed strongly, increasing by 0.9 percent (+0.9 percent in Q3) and contributing 0.28 percentage points to growth. A particularly strong performer was the travel agency industry, which increased by 7.3 percent, contributing 0.05 percentage points to headline GDP growth. Growth in transport, storage and communications slowed to 0.3 percent (+2.6 percent in Q3), mainly due to a fall back in the motion picture and computer programming and consultancy industries. The government and other services industry grew 0.4 percent (+0.4 percent in Q3).

Within the production aggregate: manufacturing increased by 0.7 percent (-0.8 percent in Q3), mainly due to a large rise in the erratically performing pharmaceuticals industry; electricity, gas, steam and air conditioning supply increased by 3.9 percent (+3.9 percent in Q3); and water supply, sewerage, waste management and remediation activities increased by 1.7 percent (+1.7 percent in Q3). However, these positive growths were offset by a 6.9 percent decrease in mining and quarrying. This was the largest fall since Q4 2012, when it fell by 9.2 percent. The Department for Business, Energy and Industrial Strategy advised the decrease can largely be attributed to continued maintenance to the Buzzard oil field in the North Sea. 

Construction output was estimated to have increased by 0.1 percent, following a fall of 0.8 percent during Q3.

Agriculture output expanded 0.4 percent after three consecutive quarters of decline.  Agriculture is the smallest of the main industrial groups with a weight of less than 1 percent in the output measure of GDP. 

Looking at 2016 as a whole, growth slowed modestly to 2 percent from 2.2 percent in 2015 and 3.1 percent in 2014.

ONS | Joana Ferreira | joana.ferreira@tradingeconomics.com
1/26/2017 12:26:03 PM